Checklist: Appointing a local sales or marketing agent (USA)

Introduction

This checklist will assist in-house counsel and private practitioners who are responsible for advising an organization regarding the appointment of a local sales or marketing agent. A sales or marketing agent is an individual or corporation hired by a business to market and sell products or services for the purpose of promoting and advertising the business to increase sales and market share. The relationship is governed by the terms of the agency agreement.

This checklist addresses the following steps:

1. Selection and recruitment of the agent
2. Introduce the parties and purpose of the agency agreement
3. Consider the specific terms and conditions of the agency agreement
4. Include miscellaneous provisions

The checklist is presented as a series of steps that you can check off as they are addressed. At the end of each step, there are explanatory notes corresponding with each requirement in the checklist.

This checklist can be used in conjunction with the following How-to guides: How to assess antitrust law risks in agency and distribution agreements, Issues to consider when drafting a franchise agreement, How to terminate a sales representative agreement and How to draft a confidentiality agreement and confidentiality clauses and Checklists: Appointing a local distributor, Drafting an agency agreement, Termination of a distributorship agreement, and What to consider to ensure a contract is valid.

Step 1 – Selection and recruitment of the agent

Step 2 – Introduce the parties and purpose of the agency agreement

Step 3 – Consider the specific terms and conditions of the agency agreement

Step 4 – Include miscellaneous provisions

Explanatory notes

Legal framework

In the United States, agency agreements, including those which involve the appointment of sales or marketing agents, are governed by state law. A sales or marketing agent has the authority of the principal to promote the goods and services of the principal’s business. Such agreements may also implicate international laws when they involve the sales and marketing of goods and services on a multi-national scale. See Checklist: Drafting an agency agreement and Panoramic: Advertising and Marketing.

Key considerations

Approach the appointment of a sales or marketing agent with care. This individual or company will be responsible for ensuring the reputation of your business in the territories in which they are assigned, and mistakes on their part can prove costly and have long-lasting legal implications for you.

Step 1 - Selection and recruitment of the agent

1.1 Compile list of potential agents

Compiling a list of potential agents requires careful consideration and research and should not be as simple as receiving recommendations and performing an internet search. It is a good idea to target and approach the correct agent for your business and as a start to:

• research agents working for companies in similar industries;
• consider and investigate why the agent left their previous employment and whether the agent left ‘with cause’ from a competitor – you could consider seeking a professional reference to be assured about the agent’s reputation;
• consider whether the agent is acting exclusively for a competitor, in which case they will not be able to act on your behalf;
• consider whether you could contact US trade associations or attend US trade shows to assist you with your search;
• consider whether any other regulatory restrictions apply, for example, if the agent is operating in a regulated industry such as food, medical or financial services; and
• consider whether the agent’s expertise is relevant to your business; for example, if the agent previously worked on infomercials and you need someone with a social media background, they may not be a good fit.

1.2 Consult with internal stakeholders

Another possible route to find an appropriate candidate is to survey and speak to your business’s stakeholders. Stakeholders have a vested interest in accelerating the sales and growth of the business and are motivated to find an effective candidate. Once a list of candidates has been compiled, it is a good idea to circulate it to internal stakeholders for review and input.

1.3 Identify and evaluate potential agent candidates

Pare down the list of names to identify a short list for interview by reviewing the following considerations.

1.3.1 Consider a candidate’s reputation in the geographic area

Consider a candidate’s reputation in the geographic area relevant to your business (eg, by word of mouth or seeking a reference from a former principal). A good reputation in one geographic area shows that the agent is attuned to the business and social considerations unique to that area and will be able to tailor their efforts on your behalf to the local market. A marketing approach that works well in New England may be less effective in the Southwestern United States though, so it is important to assess this aspect in relation to your business’s location.

1.3.2 Evaluate performance history and success in the marketplace

When assessing an agent’s reputation and previous successes, remember to look beyond simply the figures or revenue. Low dollar results may at first look like an indication of poor aptitude, but it is also worth considering the difficulty of marketing the product or service, the territories in which it was marketed, and the results of competitors, results may not be as negative as they seem.

1.3.3 Request list of business contacts that can be leveraged in the role

Consider whether the potential sales agent has customer connections that can be leveraged to your benefit. Are their connections more diverse or different from yours? Have they cultivated relationships with others in your industry? In addition, consider too that there may be a non-compete or confidentiality agreement in place that would limit the agent’s ability to leverage connections.

1.3.4 Consider direct experience in the applicable industry

Perhaps the most important consideration when deciding to recruit a sales agent is their direct experience in your industry. Again, numbers and percentages, especially high ones, may appear impressive at first, but if the medium of marketing and the product or service being sold are unrelated to your needs, the agent’s experience may not benefit your business.

1.4 Interview shortlisted candidates

Consider potential candidates and compile a short list of candidates to interview. Interviewing candidates takes time and effort, so it is worth considering the types of information you require in advance. Be sure to include questions relevant to your business, including those regarding the use of specific media platforms, demographic targeting, applicable territories, protection of your business’s property rights, duration of marketability, exclusivity of representation, and compensation structure.

1.5 Execute an agreement with the agent selected

Once the candidate is selected, the next step is to execute an agency agreement. The agency agreement will not only set out the terms and conditions of your organization’s relationship with the agent, but also will determine how your agent represents your organization to the public.

It is important to remember that the agent is likely being contracted with to perform functions that the company internally lacks the resources to conduct on its own. Therefore, thought should be given to the expectations of the agency relationship. Duties that the agent may be deemed responsible for might be as basic as merely identifying and targeting potential customers as well as developing marketing campaigns. More complex relationships might also include conducting market research, creating marketing materials, coordinating with sales teams, analyzing data, managing budgets, staying updated with industry trends, and building new relationships.

The level of detail included in an agreement is determined by for example, your organization’s needs, the geographic area covered, the duties and responsibilities assigned to the agent, and the specific requirements of the agent themselves. Detailed agency agreements limit the risk of a failed partnership and protect your business’s reputation. See Checklist: Drafting an agency agreement and Checklist: What to consider to ensure a contract is valid.

Step 2 - Introduce the parties and purpose of the agency agreement

2.1 Identify legal parties to the agreement

The first step in creating an agency agreement with the sales or marketing agent is to identify the legal parties to the agreement, including their names and addresses and in the case of a corporation their registered office address. To assist with preparation, It is useful to consult relevant secretary of state websites (see eg, Georgia Secretary of State Corporations Division Business Search), as well as checking the inclusion of pseudonyms or other identifying information to determine that the correct legal identity is noted, the entity is in good standing, and the ownership structure of each party is detailed as required. This is important to ensure accuracy and certainty of terms as if the agreement is unclear this could make enforcement difficult. Failure to make a correct identification of the responsible parties may delay enforcement while the identity of the correct party is ascertained.

2.2 Evaluate whether parents, subsidiaries, or other entities should be named as parties to the agreement

Consider including parent corporations, subsidiaries, or other entities as parties to the agreement. For example, if your business specializes in the production of roofing supplies and you wish to market a new product in the United States, it would be prudent to include the US subsidiary as a party to the agreement. Look at whether the intended relationship between the principal and the agent will be affected by not including another party to the agreement.

2.3 Describe the purpose of the agreement

It is important that you clearly articulate the purpose of the agreement and the needs of both parties in drafting the agreement. Simply stating “Agent shall be retained for sales or marketing purposes” is not sufficient. Many states have a broad definition of the scope of an agent’s authority, meaning the principal may be held liable for any acts of the agent done with an intent on the part of the agent to benefit the principal, unless the agency agreement does not allow the agent to act in that manner.

For further guidance on this subject, see Checklist: Drafting an agency agreement.

2.4 Outline the scope of work of the agent to act on behalf of the principal

2.4.1 Duties and responsibilities of the agent

The Restatement of Agency (Third) sets out five duties agents owe to the principal. Although these duties exist as a matter of law, it is always best practice to list them explicitly in the agency agreement. The five duties are:

• the duty of care, competence, and diligence;
• the duty of loyalty;
• the duty of good conduct;
• the duty to act in accordance with the terms of the contract; and
• the duty to comply with the principal’s lawful instructions.

An agency agreement should include a description of how the agent will be expected to meet the needs of the principal. This should be as specific as possible. When an agent is responsible for all the business’s marketing efforts, the agreement might state:

2.4.2 Duties and responsibilities of the principal

In accordance with common law, principals owe agents three duties:

• the duty to act in accordance with the terms of the agreement;
• the duty of indemnification; and
• the duty to deal fairly and in good faith.

As is the case with the duties of an agent, the best practice is to list these duties explicitly even though they exist as a matter of law.

Step 3 - Consider the specific terms and conditions of the agency agreement

The specific terms and conditions of an agency agreement for a sales or marketing agent are matters for negotiation between the principal and the agent. There are, however, some key areas to consider when negotiating an agency agreement.

3.1 Determine the term of the agreement

The appointment of a sales or marketing agent may last for the following durations:

• a definite term - the agreement will terminate as at a specific date. This provides flexibility to both parties to re-evaluate terms and extend or terminate at a specific date;
• an indefinite term - no definite termination date; however, it is a good idea to include termination provisions including the reasons for termination and the reasons and required notice period and service of notice in the event of termination; or
• for the duration of a specific event - the agreement terminates upon the happening of a specific event. It is important to describe the nature of the event in adequate detail to ensure there is no ambiguity or misunderstanding between the parties.

It is recommended that you specify date conventions (eg, 07/01/2025 may mean July 1, 2025, or January 7, 2025) and therefore it is best to ensure that the date is not written solely in numerals for the avoidance of doubt.

3.2 Consider exclusivity of representation

An agent can be appointed on an exclusive or non-exclusive basis. Exclusivity of representation has benefits and risks to both parties. If your sales or marketing agent is exclusive, you benefit from being their sole focus (as they are appointed to exclusively represent you as principal), while both parties risk entering into a long-term, unprofitable arrangement. An agent appointed on a non-exclusive basis is acting for more than one principal, and a non-exclusive agreement may place additional restrictions on the parties that may be represented.

3.3 Determine restrictions on agent activities

3.3.1 Specific geographic areas

Specify whether the agent will need to market or sell in a certain geographic area and note the territorial limitations clearly and unambiguously so there is no misunderstanding. It is also important to consider the consequences of breach of this provision, for example, sharing sales commissions with the agent whose territory the transactions took place in. Note too that the principal will bear the risk of an agent conducting activity outside of the agent’s territory, if it appears that the agent is conducting that activity on behalf of the principal.

3.3.2 Ability to warranty and customer specific limits

Consider a provision that the sales or marketing agent should not warranty or otherwise represent the products or services being sold in any manner not approved by your business.

In addition, an agent may only be limited to dealing with certain named customers, or customers of a certain size. It is important to consider the specific types of customer you are appointing the sales or marketing agent to deal with.

3.4 Identify standards of expected performance

Clearly define standards of expected performance so that both parties are clear as to the scope of their roles and responsibilities. If the business expects a quantifiable measure of sales or marketing efforts, it should be expressly noted and identified. The goals may be tied to:

• compensation of the agent, such as an increase in commission percentage rates;
• Identifying whether the agent needs additional support; or
• termination events.

3.4.1 Establish reporting requirements

The business and the sales or marketing agent and the principal should establish a process of reporting in advance:

• the method of progress reports (ie, written, telephonic, automated, etc.);
• the timeliness of progress reports (ie, weekly, bi-weekly, annually, etc.);
• the subject matter of progress reports; and
• whether to include an audit provision to verify claims for payment.

Note that progress reports should not be so detailed as to require the business to review every action of the agent. This is for the benefit of both parties, who will be spared either preparing or reviewing minutely detailed reports.

3.5 Payment of fees and reimbursement of costs

3.5.1 Basis of compensation (ie, hourly, commission, etc.)

Payment can be made at scheduled intervals, or upon request of the agent. An effective method of ensuring the sales or marketing agent meets the goals of the principal is to use an appropriate compensation structure. Consider the extent of the agency agreement and potential future repercussions to your business. Hourly based compensation will encourage the agent to act in the principal’s best interests in the long term, while a one-time payment may inadvertently encourage the agent to consider only the present ramifications to the principal. Paying an agent on a commission-only basis will encourage the agent to always use their best efforts, but there is an incentive to sign up business without regard for the practical ramifications of supplying the goods or services.

Many agents and principals prefer a model that involves a salary plus a commission. This provides the agent with a stable income as well as a continuing incentive to bring in new business. The principal has the burden of making continuing outlays for the agent’s salary, but benefits from having an agent who will be able to look beyond the next sale in contracting for business.

Note that payment of a worker a regular amount at fixed intervals is an indication that the worker is an employee, rather than an independent contractor. For further information on the distinction between employees and independent contractors see the IRS webpage, Independent Contractor (Self-Employed) or Employee? (classification for tax purposes) and the Department of Labor webpage, Misclassification of Employees as Independent Contractors. Information on state laws governing the distinction, review state labor or employment law websites and state tax authority websites.

On January 10, 2024, the US Department of Labor (DOL) issued a Final Rule revising the criteria for determining whether a worker is an employee or independent contractor under the Fair Labor Standards Act. This rule, effective March 11, 2024, replaced the 2021 rule and introduced a six-factor ‘economic realities’ test, emphasizing factors such as control, opportunity for profit or loss, and the nature of the work performed. However, on May 1, 2025, the DOL issued Field Assistance Bulletin No. 2025-1, instructing its enforcement staff to pause application of the 2024 rule and revert to the 2008 seven-factor test for investigations. The 2024 rule remains valid for private litigation, but is no longer used in DOL enforcement actions. This shift reflects ongoing legal challenges and internal review of the 2024 regulation.

There is no standard model for agent compensation. The model adopted depends on the industry, the locality, and the agreement between the principal and the agent.

3.5.2 Timing of payment of fees and reimbursement of costs

Consider the reimbursement of costs and fees, including the timing of such reimbursement and when it becomes due, as well as the ability to negotiate unexpected costs or review payment provisions later. In addition, the parties should consider including a clause about customer refunds. Who bears the cost? As an independent contractor, the agent would not normally absorb the tax liabilities, credit risks, or product warehousing costs associated with sales, marketing, and promotional efforts; however, it is recommended to express any payment and cost provisions in the agency agreement clearly for the avoidance of doubt.

3.6 Identify termination clauses

A termination clause should set out both the reasons for termination and the consequences of termination.

3.6.1 Time-specific termination

Agreements may terminate due to the happening of a specific event, such as three months post launch of a new product. If so, specify such an event in clear, unambiguous terms.

3.6.2 Termination for cause

The agreement should allow for termination for cause due to the failure of either party to perform its duties (eg, this could be for a breach of contract or where the agent has failed to meet targets). Be sure to include whether notice should be required, if any.

3.6.3 Termination without cause

Also consider whether the agreement should allow for termination without cause. What if the principal can no longer justify the cost of the agent or vice versa? Specify the notice requirements and consider the possible consequences that may apply on winding up the affairs of the agent (including time taken to source a replacement agent and whether that is necessary during the notice period).

3.6.4 Consequences of termination

For further information, see How-to guide: How to terminate a sales representative agreement and Checklist: What to consider when terminating a contract.

3.7 Competition and non-compete clauses

A non-compete clause prevents the agent from representing a business competitor for a limited time after termination of the agreement. Such clauses are common in sales or marketing agreements, especially in competitive markets. 

Note that not every state allows the enforcement of non-compete agreements, and that most of those that do put limits on their extent. To be enforceable, even in states that allow them, a non-compete agreement must generally be of limited duration, and of a limited geographic scope. There is currently a state legislative trend against non-compete agreements. Additionally, on April 23, 2024, the FTC adopted a rule that would ban noncompete provisions in employment contracts. See, FTC Non-Compete Clause Rulemaking. The final rule, which which would have become effective on September 4, 2024, was challenged in federal court. Two courts have issued injunctions against the final rule (see Ryan et al v FTC (No. 3:2024-cv-00986, N.D. Tex.), and US Chamber of Commerce, et al v Federal Trade Commission (No. 6:24-cv-00148, E.D. Tex.), while one court has declined to issue a preliminary injunction (see, ATS Tree Services, LLC v FTC (No. 2:24-cv-01743, E.D. Pa.)). 

In Ryan, the court held that the FTC exceeded its statutory authority in promulgating the rule and that the rule is arbitrary and capricious. The FTC appealed that decision on October 18, 2024.The FTC proclaimed that ‘The FTC has appealed that [Ryan] decision. The district court’s decision does not prevent the FTC from addressing non-competes through case-by-case enforcement actions.’ On March 7, 2025, the FTC paused its appeals against legal challenges to the Non-Compete Rule for 120 days, a request granted by the circuit courts. This move followed FTC Chair Andrew Ferguson's public statements suggesting a potential reconsideration of the agency's defense of the Rule, influenced by the change in presidential administrations and his own doubts about its value and public benefit. The FTC withdrew its appeal on September 5, 2025, effectively ending the Final Rule’s enforceability.

On September 5, 2025, the FTC officially abandoned the final rule that would have implemented a blanket ban on most employee non-compete agreements. Instead, the FTC will now challenge non-compete agreements on a more targeted, case-by-case basis, as evidenced by a recent enforcement action against one company, the issuance of warning letters to health care companies, and a Request for Information (RFI) seeking public input. The FTC also held a workshop on the subject October 8, 2025. This pivot marks the beginning of a new, more targeted enforcement landscape and introduces new uncertainties for employers regarding the legality of their non-compete agreements.

This approach from the FTC as well as actions that may be taken by any of the separate states, gives rise to an air of caution when drafting and implementing non-compete clauses. 

3.8 Interaction with third parties

Interaction with third parties, such as supply chain logistics, may be necessary to achieve the goals of the sales or marketing agency agreement. If so, specify which companies the agent may and may not interact with on behalf of your business. Be sure to consult existing agreements with third parties to determine if such inclusion violates the existing obligations of your business.

3.8.1 Indemnification clauses

Include indemnification clauses when necessary, specifying who should be held liable and the extent of liability. Indemnity clauses typically involve the agent indemnifying and holding the business harmless when the agent acts in a reckless or willfully negligent manner, such as if the agent provided a warranty for an unlawful use for the business’s product.

For further information, see How-to guide: How to draft and negotiate limitation of liability clauses.

3.8.2 Consider antitrust implications

Consider antitrust implications as well. Price-fixing and exclusive dealing may implicate the Sherman Act, the Federal Trade Commission Act, or the Clayton Act. See How- to guides: How to identify and manage antitrust and unfair trade practice risk, How to assess antitrust law risks in agency and distribution agreements and How to build a culture of antitrust law compliance.

3.9 Agent as independent contractor

Consider the potential liability of the parties. It may be advisable to include a provision that the agent is an independent contractor and not an employee of the principal and thus has no authority to make warranties or representations regarding the products or services not authorized by the business.

3.10 Definition of key terms

The inclusion of key terms will differ based on the needs of both parties. It is best practice to include as many definitions of key terms as possible (ie, to specify the intended meaning of the term), even citing regulatory or statutory citations to clarify the meaning of the agreement.

Step 4 - Include miscellaneous provisions

4.1 Governing law and jurisdiction

As the agency agreement is likely to be between parties located in different jurisdictions (eg, by reference to different countries or by different states in the United States), it is important to specify the governing law and jurisdiction that applies to the agreement. Often the state of incorporation or the location of the parties is chosen to govern the agreement. Setting out in advance what law will apply helps clarify the position at the outset (ie, to understand the applicable law in the event of a dispute).

4.2 Assignment of responsibilities of the parties

Specify whether the sales or marketing agent may assign their responsibilities to others. If the principal is a partner with an agent because of the agent’s reputation in boosting sales in a particular territory, the principal may choose to prohibit the agent from assigning their responsibilities.

4.3 Confidentiality

Include the duty of confidentiality in the agreement and specify which information should be considered confidential. Confidential information typically includes all proprietary information of the business, such as products, research and development activities, sales or marketing strategies, technical specifications concerning business products or services, trade secrets, and organizational structure. See How-to guide: How to draft a confidentiality agreement and confidentiality clauses.

4.4 Policies and procedures of the principal to be followed by the agent

The agreement should also include business-specific policies and procedures that the sales or marketing agent should follow. If the goods must be warehoused in a particular environment at a specific temperature or sold to retailers with the agreement that the price is not discounted without prior corporate approval, the agent should be made aware of such policies and procedures. Inclusivity is key when establishing a mutually beneficial sales or marketing relationship. If in doubt, include the policy and procedures and provide an option for removing them later at the discretion of the business and with proper notice to the agent.

Additional resources

The Complete Guide to Commercial Agents
Chron.com, ‘What is an Agency Agreement?’

Related Lexology Pro content

How-to guides:

How to assess antitrust law risks in agency and distribution agreements
Issues to consider when drafting a franchise agreement 
How to terminate a sales representative agreement
How to draft a confidentiality agreement and confidentiality clauses

Checklists:

Appointing a local distributor 
Drafting an agency agreement
Termination of a distributorship agreement
What to consider to ensure a contract is valid 

Clauses:

Term
Fees
Termination
Effect of termination
Non-competition
Indemnification
Governing Law
Confidentiality

Reliance on information posted:

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