Commission/Royalty agreement
Discussion
On the scrounge again! 
Rather than paying an upfront fee for some product design work we would like to offer a commission or royalty to the supplier so he would receive a small % or fee for each part sold.
Does anyone have a copy of a contract which they wouldn't mind letting me use as a template?
Rather than paying an upfront fee for some product design work we would like to offer a commission or royalty to the supplier so he would receive a small % or fee for each part sold.
Does anyone have a copy of a contract which they wouldn't mind letting me use as a template?
VX Foxy said:
On the scrounge again!
Rather than paying an upfront fee for some product design work we would like to offer a commission or royalty to the supplier so he would receive a small % or fee for each part sold.
Does anyone have a copy of a contract which they wouldn't mind letting me use as a template?
There are many ways of structuring this, and your accountant may have as much input into this as your solicitor might. I can't think of any "standard" example for this, but since I write all my own contracts then I'm quite happy with suggesting the meat of it would be something like to replace:Rather than paying an upfront fee for some product design work we would like to offer a commission or royalty to the supplier so he would receive a small % or fee for each part sold.
Does anyone have a copy of a contract which they wouldn't mind letting me use as a template?
"In consideration of the services provided by the Supplier, and for the transfer of all rights [insert boiler plate about rights relevant to your market, in this world and all others] to the Client, the Client will pay to the Supplier a fee of £10,000"
with:
"In consideration of the services [etc], the Client will pay to the Supplier a fee of £3,000. In addition the Client will pay to the Supplier a royalty of 3p for each item sold by the Client."
That part is easy. The devil is in the detail. Some questions you need to answer:
- who will own the copyright in the design?
- are there patent or registered design issues?
- who will count the number of products sold?
- what happens if the supplier doubts the sales figures? who pays for any additional, detailed record-keeping and auditing required?
- do you want to avoid any implied right of the supplier to march in to your office on any day and demand all your books?
- what will happen if your sale price has to drop - can you re-negotiate?
- what about stock sold to overseas markets?
- what if you decide to licence production to a 3rd party?
- what protection does the supplier have if your company goes into administration and then is bought / reconstituted and starts selling again?
- do you want to allow the supplier to assign the proceeds of the contract (so they could sell the royalty flow to a third party, or use it as security on a loan) or not?
- how often are you going to pay the supplier?
- does the supplier have the right to claw back the rights if you don't pay and sell the design to somebody else?
- when are sales, fees, and so on recognised for accounting purposes?
- do you want to include a buyout clause so that you can "pay the supplier off" later?
- how are you going to treat products derived from this one, or ancillary to this one, or sold together with this one?
- if you hire another designer to modify the product to create "Mark II", does the royalty stay the same or reduce or something else?
- what will happen if you want to sell the product line (as a whole) to somebody else?
and so on and so forth. It is this level of detail, and the other issues I haven't thought of in 2 minutes, which a good contracts lawyer should sort out for you. So long as your brief for the job is written and detailed, if the lawyer messes it up then her/his PII will cover you.
As I say, I'd write my own, but I don't think I would want to use any sort of "standard" document for this.
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