Commissions to Contractor:
As commissions are paid to Broker through the efforts of Contractor, the following percentage of any and all such commissions shall be paid to Contractor by Broker promptly after receipt and processing, less any amounts owing to Broker subject to the provisions below:
[Optional:] Contractor further agrees to pay Broker a monthly fee of $______, payable on the first of each month [and describe any other fees].
[Optional:] In addition, a sum will be withheld from each transaction by Broker for the Errors and Omissions Insurance premium. In consideration of the foregoing, Contractor will pay Broker a monthly fee of $_____, payable _____ months in advance.
This paragraph provides for the payment of commissions to the contractor by the broker and when they will be payable. It will also be provided that any such commissions will be payable after deduction of such costs as commission splits, desk fees and other expenses. In many cases the agreement will have a detailed commission payment schedule as an exhibit to the agreement.
E & O Insurance:
The Errors and Omissions Insurance Carrier shall be chosen at Broker’s discretion. Contractor understands that he/she is responsible for payment of the deductible amount upon request, for each Errors and Omissions claim. Contractor shall immediately notify Broker of any circumstances that may give rise to any kind of claim against Contractor and/or Broker, and Contractor shall take no action which might jeopardize insurance coverage. In the event of a claim, lawsuit or arbitration demand which is not wholly covered by insurance, Broker may withhold from Contractor’s commissions payable, an amount adequate to satisfy any amounts not covered, which Broker shall place in an account for disputes, pending settlement or other disposition of the matter. Broker may, in Broker’s sole discretion, apply such sums as necessary to settle or to satisfy any such claim or award.
Contractor understands that most insurance will not cover certain egregious forms of claims and liabilities or certain forms of property or property conditions, that it will normally not cover acts or omissions occurring prior to the time of the association of Contractor with Broker and will not cover any acts or omissions which occur or upon which claims are filed after departure from Broker for any reason. In the event of coverage, Contractor will refrain from any act which would constitute a violation leading to termination of the policy or the uninsurability of Broker. All uninsured losses shall be borne by Contractor.
Sales Associates should be cautioned that there are circumstances where E & O
may not provide coverage, i.e., fraud, commercial environmental issues,
transactions where Sales Associates act as a principal.
Remember a provision may state that the broker will select the E & O Insurance provider at his or her discretion. The contractor is responsible for the payment of any deductible amount applicable to any payment made for a claim covered by the insurance. It also states that the contractor will notify the broker of any circumstances that may give rise to a potential claim against the broker and insurer. It also states that the contractor will take no action that might jeopardize the E & O coverage. The provision also authorizes the broker to withhold any amounts from the contractor’s commissions that will satisfy any liabilities not covered by the insurance and how these monies will be handled. This provision also identifies any claims not covered by the E & O insurance that include but are not limited to: egregious forms of liability such as fraud, claims for certain property conditions, or any acts or omissions occurring prior to the time of the association of the contractor with the broker. It also provides that no such claims will be paid after termination of the contractor with the broker.
Contractor Acting as a Principal:
Contractor understands that there is no Errors and Omissions insurance coverage for any transaction in which Contractor acts as a principal buyer, seller, lessee or lessor. Therefore, in the event Contractor intends to enter into any such transaction as a principal, he/she shall notify Broker before entering into a contract or lease agreement, and shall include such clause or clauses as Broker may deem necessary in any such contract or lease agreement.[Optional:] As to each such transaction, Contractor shall pay to Broker a fee of $______, in lieu of the Errors and Omissions premium. This amount shall be deposited into Broker’s account for disputes, and may be applied, in Broker’s sole discretion, toward the costs of defending and/or settling any claims made against Broker arising from any transaction in which any Independent Contractor of Broker acts as a principal.
In any event, Contractor agrees to indemnify and hold Broker harmless from any claims, demands, complaints or actions made against Broker as a result of any transaction in which Contractor acts as a principal.
This provision establishes that the E & O insurance will not provide coverage in transactions where the contractor is acting as both a principal and agent in the transaction. In addition, it requires the contractor to notify the broker before entering into this type of transaction and in some cases may entitle the broker to charge the contractor a fee in lieu of the premiums for the E & O insurance to offset the additional risks in this transaction.
Authority to Commit Broker:
Contractor shall have no power to make statements for, bind, commit or obligate Broker to any representation, promise, agreement or the like unless specifically authorized in writing by Broker. All listings, transactions in progress, other professional activity, commissions payable and business opportunities belong to Broker. All transactions will be considered offers for business which Broker must accept in writing by initiating the same.
This provision acknowledges that the contractor may not bind the broker to any agreement, representation or promise without the broker’s authorization in writing. It also acknowledges that any listings, transactions in progress, other professional activity, commissions payable and business opportunities belong to the broker. Also, any transaction will be considered an “offer for business” which the broker must accept in writing by initiating the written agreement.