Agency can only exist in RE by written agreement, buying or selling if an "agent" has no agreement to act they are not in any agency relationship. So, yes, they must have an agency contract, a buyer's agreement or a listing agreement, there are also "agreements to show".
A buyer's agreement sets terms for an agent to represent only a buyer, a buyer may pay a commission of fee but on properties that are listed, the listing agreement provides compensation to any representative of a buyer and the buyer generally pays nothing to that agent, but could if additional amounts were agreed to. Any additional amount would be a "bonus".
A listing agreement is between the owner and the listing agent. Realtors use an agreement that provides for a co-brokerage arrangement, this authorizes other agents to enter upon the property to show or preview and sets the compensation to be paid to the listing agent-broker. Brokers have prearranged agreements that set commission splits among the members of their area brokers, the common commission is 6% with a split being 50/50.
An agreement to show is generally for an agent to represent a buyer when a property is not listed, such as a FSBO and the property owner must give permission for an agent to bring others on the property. These can be made with special agreements as to who will pay any commission, the buyer or seller can agree to pay the agent. These do not put an agent into an agency relationship with the owner but only give permission as mentioned.
These agreements can be specific and limited or exclusive.
Any of these agency agreements can be specific or limited to certain parties, for example a seller may list a property and reserve the right to sell without a commission being due the agents if they sell to a list od reserved potential buyers, an owner may have shown Joe the property prior to the listing and reserve or except out Joe from that agreement. These specific agreements will apply to a specific property and the term of the agreement may be limited in time, for only one showing or set for a specific period of time.
An exclusive listing for an agency relationship requires the client to only use that agent for all business they may do over a period of time. These may have limitations, such as excluded potential buyers or excluded properties and there could be other agreements made, such as paying only certain compensations to that agent and allowing other agents to be paid the customary commission on an exclusive listing agreement for say, 12 properties.
Listing agreements are generally exclusive to that agent/broker until the property sells or for a certain time period. If agreeable to the brokers, a "Co-listing" agreement may be made, this gives an exclusive right to list and sell a property to 2 or more agents in the same brokerage or even different brokerages. This co-listing arrangement is more common within the same brokerage with agents who work together, such as a mentor-mentee arrangement.
Exclusive buyer's agreements will cover any property a buyer purchases over a period of time. If a buyer were to look at a FSBO on their own, a commission would be due that buyer's agent (unless it had been excepted out) and the buyer would be obligated to pay the fee. As I mentioned, an agent must have an authorization to bring a client upon a property, if that agent goes on the property, they get the authorization to show and will try to obtain a fee agreement, but if the agent never goes to the property and the buyer purchases, the buyer will be responsible to pay the commission due.
Listing agreements are generally for 6 months, it depends on the market and can be longer. A Realtor generally won't go less than 6 months but may if they are in a market with expected quick turn around or sales.
Agency agreements also have "protected periods" that extend the agreement (usually for the same term as the agreement) in the event any transaction is made where the agent was the procuring cause of that transaction. If the transaction came about because of the efforts of the agent performing their duties and activities, such as advertising or making introductions to the parties, that agent will be due compensation under that original agreement.
It is illegal for an agent to accept any compensation without an agency relationship being established, it is also illegal for any agent to pay compensation based on any sale price or splitting commissions to any other party who is not a licensee. This does not preclude an agent for paying for any service provided in connection with a sale, they may pay a handyman to fix something required to close for example. Fees paid by agents become illegal if that fee is tied to a successful transaction at a sale price, they may be able to pay a birddog that finds them a list of possible listings. What they can or may pay is subject to their broker's approval, in fact, everything an agent does in real estate is subject to their broker's approval as the broker has responsibility for that licensee.
Back more to the OP's arrangement, that arrangement as to an exclusive agreement for 14 months is one I would generally not do as an investor, the term is excessive. Many agents want 12 months, most probably take 6 months. But, the thing is, that agent needs to plan the best use of their time over the year or into the future. They need X closings at an average sale price to budget for their business. If they work for you or with you, they could be working on offers for say 4 months without any success, the longer their exclusive relationship the more likely they will be compensated over that term.
As an investor, you really need to establish trust with those you work with, if they know that if you find something and that you will call them to handle the transaction, they may assist you as a "prospect" instead of as a client until it's time to make an offer or list, at which time they would need to enter into a formal agency agreement.
As to KW sandbagging commissions as some type of credit to be paid to you later on when you become a licensee, here, we would still view that as compensation, it is an inducement based on a sale price for you to do something else, to become an agent and is unethical if not illegal, IMO. Compensation is anything of value, that would include the promise of employment or future business arrangement in exchange for closing a transaction at any sale price. KW brokerages are usually a good franchise with good agent support, that doesn't mean every broker franchisee runs a good or ethical brokerage.
All of this is subject to local custom, except that agents must have a written agency agreement to represent a client in real estate matters. :)
