No commissions: Overview, definition, and example
What is no commissions?
"No commissions" refers to a clause in a contract that specifies that no party will receive any form of commission or payment based on the transaction, sale, or service provided under the agreement. This clause is often included to prevent third parties from receiving financial incentives for influencing a decision or completing a deal.
For example, if a business hires an employee to provide consulting services, a "no commissions" clause might ensure that the employee is paid a flat salary instead of earning a percentage of any business generated.
Why is no commissions important?
The "no commissions" clause is important because it removes any potential conflicts of interest that might arise if a party were financially incentivized to prioritize certain actions over others. It ensures that the focus remains on the contractual agreement itself, rather than on external financial motivations. This can help keep relationships between parties transparent and fair, avoiding disputes over commissions or hidden fees.
Understanding no commissions through an example
Imagine a company that hires a marketing consultant. The agreement clearly states that the consultant will not receive any commissions for bringing in new clients or generating sales. Instead, the consultant is paid a fixed fee for their services. This ensures that the consultant’s recommendations are unbiased and focused solely on delivering value to the company, rather than being influenced by commission-based incentives.
In another example, a real estate company might hire a property manager to oversee their buildings. The property manager is paid a salary under the terms of the agreement, with a "no commissions" clause ensuring they do not earn a commission on any lease agreements or sales made within the buildings.
An example of a no commissions clause
Here’s how a clause like this might appear in a contract:
“The Parties agree that no commissions will be paid under this Agreement for any services rendered, and all compensation will be paid based solely on the agreed-upon fees.”
Conclusion
The "no commissions" clause helps to create a straightforward and transparent contractual arrangement by ensuring that no party receives additional payments beyond the agreed terms. This prevents conflicts of interest and ensures that both parties focus on the work at hand, without being influenced by financial incentives tied to sales or transactions.
This article contains general legal information and does not contain legal advice. Cobrief is not a law firm or a substitute for an attorney or law firm. The law is complex and changes often. For legal advice, please ask a lawyer.