A sourcing agent agreement should state what the agent will do, how it is paid, who holds the money and the goods, what you receive and how the agreement ends. Below is a plain-language outline you can compare against any draft. It is not a legal template, and you should have a lawyer review the final text.
For the shorter version, read what a sourcing agent contract should include. This article goes clause by clause.
The clauses, in order
- Parties: the legal names, addresses and registration numbers of you and the agent. See verifying a sourcing agent is registered.
- Scope: the products, the tasks and the stages. Each task should be listed, for example supplier search, audits, sample checks, testing and loading supervision.
- Exclusions: what the agent will not do, so there is no argument later.
- Fee: how much and in what form, when it falls due and what is passed on at cost. Our guide sourcing agent fees in India explains the models.
- Payment flow: that you pay the supplier directly and the agent holds no funds for goods.
- No payment from suppliers: a statement that the agent and its related parties take nothing from any supplier.
Clauses about information
- Reports: that you receive every audit, test and inspection report in full and unedited.
- Ownership: that reports, samples and supplier information collected for you belong to you.
- Confidentiality: that your specifications, designs and prices are protected. See can a sourcing agent sign an NDA.
- Conflicts: that the agent will tell you if it has a relationship with a supplier it proposes.
Clauses about problems
- Failed inspection: what the agent does, who decides on rework or rejection, and who pays for a re-inspection. See what happens if the goods fail inspection.
- Responsibility: what the agent is and is not liable for. An agent does not usually guarantee the supplier's goods, and the agreement should say so clearly in either direction.
- Subcontracting: whether the agent may hand work to others, and who is named.
- Disputes: which law applies and where disputes are heard.
Clauses about ending the relationship
- Term and notice: how long it runs and how either side can end it.
- What you receive on exit, including files and contacts for suppliers found on your behalf.
- Non-circumvention: some agents ask that you do not go around them to a supplier they introduce. Read this closely, set a clear time limit and make sure it works both ways.
Red flags in a draft
- No scope, or a scope phrased only as best efforts.
- A requirement to pay the agent for goods.
- A clause allowing payments from suppliers.
- An unlimited non-circumvention term.
- Reports described as the agent's property.
A short worked example of the scope clause
A good scope clause reads like a checklist, not a promise. For example: the agent will identify and audit up to a stated number of suppliers for a named product, report on each in writing within a stated number of days, check one sample from each shortlisted supplier against your specification, arrange testing at a named type of laboratory with costs passed on at cost, and attend loading. A clause that says only that the agent will find the best supplier gives you nothing to hold anyone to.
Keep the clause short, specific and measurable, and attach your product specification as a schedule.
Before you sign
Read the whole draft once for what it says, and once for what it leaves out. Ask the agent to explain any clause you do not follow. Get your own lawyer to check the governing law and dispute clauses, since these differ by country. And keep a signed copy of the scope and fee schedule with your order files, because that is the part you will need first if something goes wrong.
How we work
We agree the scope and one written fee with you before work starts, and the terms say that we take nothing from factories and that you pay the factory directly. Ask for our terms in the free sourcing review and compare them with this outline. You can also read how it works.