If you’re growing your business, there’s a good chance you’ll eventually ask someone else to help you sell, lease, source customers, or negotiate deals on your behalf.
That “someone else” might be a sales agent, a broker, a business development consultant, a buyer’s agent, a recruitment agent, or even an introducer who brings you leads for a fee. Whatever you call them, the arrangement is usually documented in an agency agreement.
One of the biggest commercial decisions you’ll make in that document is whether the relationship is set up as an open agency agreement or an exclusive agency agreement. The difference affects your costs, your flexibility, your risk of commission disputes, and how motivated your agent is to prioritise your deals.
Below, we’ll break down what each option means in practical terms, when each tends to work best for Australian small businesses, and what to include in your agreement to reduce misunderstandings from day one.
Note: some industries have specific rules and regulations around agency arrangements and commission (for example, real estate, recruitment/labour hire, and financial services). The best structure (and what’s enforceable) can depend on your state/territory and the type of work being done, so it’s worth getting advice for your situation.
What Is An Open Agency Agreement?
An open agency agreement (sometimes called a “non-exclusive” or “open listing” arrangement, depending on the industry) generally means you can appoint more than one agent to perform the same task at the same time.
In an open agency arrangement, you usually only pay commission (or a success fee) to the agent who is the effective cause of the deal that completes. Put simply: the agent who actually brings about the successful transaction gets paid. However, how this is assessed can vary by industry and by the wording of your agreement - and in some regulated sectors there may be specific entitlement rules.
How An Open Agency Agreement Typically Works
- You can engage multiple agents to market the same opportunity, find buyers, secure tenants, or introduce customers.
- You can also keep working on it yourself (for example, selling directly to your own leads) if the agreement allows it.
- Commission is generally payable only on success, and usually only to the agent whose efforts resulted in the completed deal.
- The main legal risk is overlap (two agents claiming they introduced the same buyer/customer).
Open agency can work well when you want maximum market coverage and you don’t want to be locked in to one provider. But you do need a well-drafted agreement (and good internal record keeping) to avoid disputes about who “introduced” who.
What Is An Exclusive Agency Agreement?
An exclusive agency agreement usually means you appoint one agent only for a defined period, and they have the sole right to act for you for that specific task or opportunity.
Depending on how the agreement is drafted, exclusivity can be strict (you cannot engage another agent at all) and it can also restrict you from closing the deal yourself without still paying the agent.
How An Exclusive Agency Agreement Typically Works
- One appointed agent gets the exclusive right to market, negotiate, or introduce parties for the defined scope.
- You may still be required to pay commission even if the buyer/customer comes from your own efforts during the exclusivity period (this is a common point of surprise for business owners).
- The agent may be more motivated to invest time and money because they’re not competing against other agents for the same outcome.
- The agreement often includes an exclusivity term (for example, 30, 60, or 90 days) and sometimes an extension mechanism.
Exclusive agency can be a great fit if you want one accountable partner who will genuinely prioritise your matter. But it also means you need to be comfortable with the lock-in period and crystal clear on when commission is triggered.
Open vs Exclusive: Key Differences That Matter For Small Businesses
Choosing between an open agency agreement and an exclusive agency agreement isn’t just a “preference” issue. It affects your risk, negotiation leverage, and how the commercial incentives play out.
1. Flexibility And Control
- Open agency agreement: higher flexibility. You can test multiple channels, rotate underperforming agents, or pursue leads yourself (if permitted).
- Exclusive agency agreement: lower flexibility during the exclusivity term. One agent controls the process (which can be good or bad depending on performance).
If your business relies on speed (for example, quickly filling a vacancy, closing a sale, or sourcing customers fast), open agency can let you move in parallel. If you value consistent messaging and a single point of contact, exclusive agency can be cleaner.
2. Agent Incentives And Effort
- Open agency agreement: agents may hesitate to invest heavily (time, advertising spend, senior staff) because they can lose out to another agent at the last moment.
- Exclusive agency agreement: the agent may be more willing to invest because they have a protected opportunity to earn.
In practice, this is often the deciding factor. If you want the agent to do real work (not just “list it and wait”), exclusivity can align incentives.
3. Cost And Commission Risk
Both structures can be “success fee only”, but the risk profile is different:
- Open agency agreement: you may face disputes where multiple agents claim commission, especially if your agreement doesn’t define an “introduction” clearly.
- Exclusive agency agreement: you may owe commission even if the customer/buyer is sourced through your own network during the exclusivity period (depending on drafting).
Either way, commission drafting matters. A clear Commission Agreement style commission clause (even within a broader agency agreement) can help prevent “we never agreed to that” conversations later.
- Open agency agreement: performance can be hard to measure because multiple agents are involved and messaging may be inconsistent.
- Exclusive agency agreement: accountability is clearer: one agent owns the result during the term.
If you want KPI reporting, update frequency, and a defined marketing plan, exclusivity makes it easier to enforce those obligations.
5. Brand And Relationship Risk
If multiple agents are approaching the same market, it can sometimes create confusion (or even reputational harm) if different promises are being made to the same audience.
To reduce that risk, make sure your agreement documents what the agent can and can’t say, what they can publish, and how they represent your business. This sits within the broader law of agency concept: when someone acts on your behalf, their conduct can have legal and commercial consequences for you.
When Should You Use An Open Agency Agreement?
An open agency agreement can be a strong option for Australian small businesses when you want freedom and competitive pressure, and you’re prepared to manage the relationship carefully.
Open agency tends to suit you when:
- You want maximum reach quickly (multiple agents tapping different networks).
- The opportunity is straightforward and doesn’t require deep upfront investment by the agent.
- You already have warm leads and you want the ability to close a deal directly without being locked in (subject to the agreement terms).
- You’re testing the market and you don’t yet know which agent performs best.
Common Pitfalls With Open Agency Agreements
- Unclear “introduction” rules: If two agents speak to the same prospect, who gets paid?
- Long “tail” commission periods: You might owe commission months later if the prospect reappears and signs.
- No process for lead registration: Without a simple “who introduced whom and when” process, disputes become very hard to resolve.
A practical fix is to require written lead registration (for example, the agent must email you the name and details of a lead before commission entitlement arises) and to set reasonable timeframes for when commission can be claimed after the agreement ends.
When Should You Use An Exclusive Agency Agreement?
An exclusive agency agreement is often the better fit when you want a single trusted partner to run the process properly and you’re comfortable committing for a defined period.
Exclusive agency tends to suit you when:
- The agent needs to invest upfront (marketing spend, specialised staff time, travel, campaigns, or negotiations).
- The deal is complex (multiple stakeholders, bespoke negotiation, regulated process, long lead times).
- You want consistent messaging and a controlled approach to market.
- You want clear accountability for outcomes and reporting.
Exclusive Doesn’t Always Mean “You Must Use Them For Everything”
Exclusivity should be defined carefully. For example, you might agree the agent is exclusive only for:
- a specific territory (e.g. NSW only);
- a specific channel (e.g. online leads only);
- a specific customer type (e.g. enterprise accounts only); or
- a specific product line.
This kind of “limited exclusivity” can give your agent the confidence to invest, while still leaving you room to grow other parts of the business.
Watch For These Clauses Before You Sign
- Commission on your own leads: you may still owe commission even if you find the customer yourself during the exclusive period.
- Extension terms: some agreements auto-renew unless you give notice.
- Restraints and non-circumvention: you may be restricted from dealing directly with prospects introduced by the agent for a period after termination.
- Minimum performance obligations: if you’re committing exclusively, you’ll usually want clear service levels and reporting.
Even where a template is used, enforceability still depends on whether the agreement meets the requirements of what makes a contract legally binding (including clear offer, acceptance, consideration, and intention to create legal relations).
What Should Your Agency Agreement Include (Either Way)?
Whether you choose an open agency agreement or an exclusive agency agreement, the “right” structure is only half the story. The other half is drafting the terms so everyone has the same expectations.
Below are clauses we commonly recommend businesses think through early.
Scope: What Exactly Is The Agent Appointed To Do?
Be specific about:
- what the agent is authorised to do (introduce leads, negotiate, sign documents, collect deposits, etc.);
- what the agent is not authorised to do; and
- any approval steps (e.g. you must approve pricing, key terms, or final documentation).
Many businesses also use a separate letter of authority to confirm exactly what a person can do on the business’ behalf, especially if third parties (like customers or suppliers) will rely on that authority.
Exclusivity (Or Non-Exclusivity) And The Term
Spell out clearly:
- is it exclusive or open (non-exclusive)?
- what is the duration?
- can you appoint other agents during the term?
- can you still transact directly?
If exclusivity is “limited”, define the boundaries in plain language so there’s no argument later.
Commission: When Is It Earned, How Is It Calculated, And When Is It Payable?
Commission disputes are one of the most common pain points with agency relationships.
Your agreement should cover:
- Trigger event: is commission earned on introduction, signing, payment, settlement, delivery, or another milestone?
- Rate and method: fixed fee, percentage, tiered rate, or hybrid.
- GST: confirm whether amounts are inclusive or exclusive of GST (and consider getting accounting advice on how GST applies in your circumstances).
- Split commissions: what happens if two agents contribute, or if there’s an internal sales team involved?
- Tail period: if a deal completes after termination with a prospect introduced during the term, is commission still payable?
Lead Registration And Record Keeping (Especially For Open Agency)
If you’re using an open agency agreement, add a clear, workable system for:
- how leads are identified and logged;
- how you confirm whether the lead is “new” or already known to your business; and
- how disputes are handled.
This is one of those areas where a few lines of drafting can save months of arguments.
Agents often need access to sensitive commercial information, like pricing, pipeline data, supplier rates, or customer lists. Your agreement should set clear confidentiality obligations.
If you’re sharing sensitive information before the full terms are finalised, it can also be sensible to put an Non-Disclosure Agreement in place first.
Set-Offs, Deductions, And Disputed Invoices
Businesses sometimes assume they can simply “deduct” losses or costs from an agent’s commission if something goes wrong. In reality, you need the contract to support that right.
A properly drafted set-off clause can clarify whether you can offset amounts owed against commission claims (and under what circumstances).
Termination: How Can Either Party Exit The Arrangement?
Your agreement should include:
- termination for convenience (with notice);
- termination for cause (e.g. breach, misconduct, insolvency);
- what happens to in-flight negotiations and active leads; and
- post-termination commission rules.
This is especially important for exclusive agency agreements, because “getting out early” can otherwise become expensive or contentious.
Authority And Signing: Who Can Bind Your Business?
If an agent is negotiating, you’ll want to be clear on whether they can bind you to a deal, or whether all agreements are “subject to” your written approval.
Where you do want an agent to sign certain documents, it’s worth aligning the agency agreement with your internal governance (for example, director approval processes), and using documentation that reflects how your business actually operates.
How Do You Choose The Right Option For Your Business?
If you’re deciding between an open agency agreement and an exclusive agency agreement, the best approach is to work backwards from your goals and risk tolerance.
Ask Yourself These Practical Questions
- How quickly do I need results? If speed matters, open agency can increase coverage. If quality and consistency matter, exclusive can work better.
- Does the agent need to invest upfront? If yes, exclusive arrangements are often more realistic.
- Do I already have warm leads? If yes, make sure the agreement doesn’t accidentally require commission on your own leads (unless you’re comfortable with that).
- How easy will it be to prove who introduced a lead? If it’s hard to track, open agency may create disputes unless you implement lead registration.
- What is the reputational risk? Multiple agents contacting the same market may confuse customers or create mixed messaging.
A Common Middle Ground: Start Open, Then Move To Exclusive
Many small businesses start with an open agency agreement while they test performance, then move to an exclusive agency agreement once they’ve found an agent who delivers.
If you take that approach, it’s important that your initial open agency agreement clearly deals with:
- lead ownership and tail periods; and
- how you can end the arrangement cleanly before moving to exclusivity with someone else.
It’s also worth keeping your agreements consistent with your broader contract suite (for example, customer terms, supplier terms, service agreements), so your business isn’t managing conflicting obligations across different documents.
Key Takeaways
- An open agency agreement lets you appoint multiple agents at the same time, usually paying commission only to the agent who successfully brings about the completed deal (noting this can depend on the wording of your agreement and any industry-specific rules).
- An exclusive agency agreement appoints one agent only for a defined scope and period, which can improve focus and effort, but may reduce your flexibility and can create commission obligations even for your own leads (depending on drafting).
- For open agency, strong lead registration and a clear definition of “introduction” are key to reducing commission disputes.
- For exclusive agency, make sure you understand the term, any auto-renewal, performance expectations, and the commission trigger before signing.
- In both types of agreements, you should document scope of authority, confidentiality, commission, tail periods, set-off rights, and termination rules in plain, practical terms.
- Getting the agreement right upfront is usually far cheaper than dealing with a dispute later, especially where there are multiple agents or high-value transactions involved.
If you’d like help putting the right agency agreement in place for your business (open or exclusive), you can reach us at 1800 730 617 or team@sprintlaw.com.au for a free, no-obligations chat.
