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Referral Agreement

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REFERRAL AGREEMENT

THIS REFERRAL AGREEMENT (the "Agreement") is dated this ________ day of ________________, ________.

BETWEEN:

______________________

(the "Client")

______________________

(the "Broker")

(individually the "Party" and collectively the "Parties")

BACKGROUND
The Client is of the opinion that the Broker has the necessary qualifications, knowledge and contacts to act as an intermediary for the Client, facilitating connections as provided in this Agreement between the Client and the Broker’s contacts within the insurance industry.
The Broker is agreeable to providing such services to the Client in exchange for compensation and other valuable consideration as outlined in this Agreement, and in accordance with the terms and conditions set out in this Agreement.

IN CONSIDERATION OF the matters described above and of the mutual benefits and obligations set forth in this Agreement, the receipt and sufficiency of which consideration is hereby acknowledged, the Parties agree as follows:

SERVICES
The Broker will provide the following services to the Client under this Agreement (the "Services"): _______________________________________________________________
_______________________________________________________________
_______________________________________________________________
The Broker will only be required to make introductions between the Client and the parties referred under this Agreement, and will not be involved in negotiations between the Client and the referred parties.
EXCLUSIONS
Services do not include, and the Broker will not be compensated for, the provision of referred contacts previously known to the Client prior to the start of the term of the Agreement or provided by someone other than the Broker during the term of the Agreement.
LICENSING
The Broker will comply with all applicable legal requirements necessary to legally provide the Services to the Client, including obtaining any licensing that may be required.
TERM OF AGREEMENT
This Agreement will begin on ___________, 20____ and will continue until either Party provides at least ________ days' prior, written notice to terminate the Agreement (the "Term").
NO EXCLUSIVITY
The Broker understands that they are entering into a non-exclusive contract with the Client meaning that the Client will be free, during and after the Term, to engage or contract with third parties for the provision of services similar to the Services.
NO CIRCUMVENTION
The Client agrees to not solicit or conspire with any person referred by the Broker during the Term of this Agreement, or otherwise take any action that would circumvent the Broker’s legitimate interests in this Agreement.
Should the Client breach the above clause, the Broker will be entitled to the compensation that would have been due under this Agreement had the Client not circumvented the transaction.
PAYMENT
The Broker will be paid as follows (the "Payment"):
1. a flat fee of $___________ for each contact or candidate referral provided by the Broker to the Client.
Invoices detailing the amount due for Services will be provided by the Broker to the Client every 30 days.
Payment for invoices submitted by the Broker to the Client are due within 30 days of receipt.
At the time that Payment is due, the Broker will provide to the Client a report corresponding to and detailing the number of referrals provided to the Client during the payment term.
The Payment as stated in this Agreement does not include sales tax, or other applicable duties as may be required by law. Any sales tax and duties required by law will be charged to the Client in addition to the Payment.
EXPENSES
The Broker will not be reimbursed for any expenses incurred in connection with providing the Services of this Agreement.
CONFIDENTIALITY
The Broker agrees that they will not disclose, divulge, reveal, report or use, for any purpose, any Confidential Information which they have obtained, except as authorized by the Client or as required by law. The obligations of confidentiality will apply during the Term and will survive indefinitely upon termination of this Agreement.
Confidential information (the "Confidential Information") refers to any data or information relating to the Client which would reasonably be considered to be private or proprietary to the Client and that is not generally known, and where the release of that Confidential Information could reasonably be expected to cause harm to the Client including, but not limited to, Trade Secrets, contact lists, financial information, business processes, client records, product information, employee records, prospective agreements, research and analyses.
Trade secrets (the "Trade Secrets") include but are not limited to any data or information, technique or process, tool or mechanism, formula or compound, pattern or test results relating to the business of the Client, which are secret and proprietary to the Client, and which give the business a competitive advantage.
Confidential Information does NOT include:
1. information that is generally known in the industry of the Client;
2. information that is now or subsequently becomes generally available to the public through no wrongful act of the Broker;
3. information rightly in the possession of the Broker prior to receiving the Confidential Information from the Client;
4. information that is independently created by the Broker without direct or indirect use of the Confidential Information; or
5. information that the Broker rightfully obtains from a third party who has the right to transfer or disclose it.
INDEPENDENT CONTRACTOR
In providing the Services under this Agreement it is expressly agreed that the Broker is acting as an independent contractor and not as an employee. The Broker and the Client acknowledge that this Agreement does not create a partnership or joint venture between them, and is exclusively a contract for service. The Client is not required to pay, or make any contributions to, any social security, local, state or federal tax, unemployment compensation, workers' compensation, insurance premium, profit-sharing, pension or any other employee benefit for the Broker during the Term. The Broker is responsible for paying, and complying with reporting requirements for, all local, state and federal taxes related to payments made to the Broker under this Agreement.
Except as otherwise provided in this Agreement, the Broker will have full control over working time, methods, and decision-making in relation to provision of the Services in accordance with the Agreement. The Broker will work autonomously and not at the direction of the Client. However, the Broker will be responsive to the reasonable needs and concerns of the Client.
Except as otherwise provided in this Agreement, the Broker will provide at the Broker’s own expense, any and all equipment, software, materials and any other supplies necessary to deliver the Services in accordance with the Agreement.
NOTICE
All notices, requests, demands or other communications required or permitted by the terms of this Agreement will be given in writing and delivered to the Parties at the following addresses:
1. ______________________
  _____________________________________
2. ______________________
  _____________________________________
or to such other address as either Party may from time to time notify the other, and will be deemed to be properly delivered:
1. immediately upon being served personally;
2. two days after being deposited with the postal service if served by registered mail; or
3. the following day after being deposited with an overnight courier.
MODIFICATION OF AGREEMENT
Any amendment or modification of this Agreement or additional obligation assumed by either Party in connection with this Agreement will only be binding if evidenced in writing signed by each Party or an authorized representative of each Party.
ENTIRE AGREEMENT
It is agreed that there is no representation, warranty, collateral agreement or condition affecting this Agreement except as expressly provided in this Agreement.
SEVERABILITY
In the event that any of the provisions of this Agreement are held to be invalid or unenforceable in whole or in part, all other provisions will nevertheless continue to be valid and enforceable with the invalid or unenforceable parts severed from the remainder of this Agreement.
GOVERNING LAW
This Agreement will be governed by and construed in accordance with the laws of the State of Ohio.
ASSIGNMENT
The Broker will not voluntarily, or by operation of law, assign or otherwise transfer its obligations under this Agreement without the prior written consent of the Client.
GENERAL PROVISIONS
Time is of the essence in this Agreement. No extension or variation of this Agreement will operate as a waiver of this provision.
This Agreement may be executed in counterparts.
Headings are inserted for the convenience of the parties only and are not to be considered when interpreting this Agreement. Words in the singular mean and include the plural and vice versa. Words in the masculine mean and include the feminine and vice versa.
This Agreement will enure to the benefit of and be binding on the Parties and their respective heirs, executors, administrators and permitted successors and assigns.

IN WITNESS WHEREOF the Parties have duly affixed their signatures under hand and seal on this ________ day of ________________, ________.

_______________________________

______________________ (Client)

_______________________________

______________________ (Broker)

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Last updated June 6, 2024

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What is a Referral Agreement?

A Referral Agreement establishes the terms and conditions when an individual or business provides business leads for another company. In other words, it outlines how one party, the broker, is compensated for referring customers, contacts, or service providers to a business.

Referral Agreements are part of a marketing strategy for companies seeking to expand their business. These agreements outline essential details such as fees, payment methods, and the contract length.

A Referral Agreement is also known as a:

Referral partnership agreement
Referral fee agreement
Affiliate referral agreement
Business referral agreement
Client referral agreement
Finders fee agreement
Broker agreement

If you’re looking to create a temporary partnership with another business to achieve mutual sales goals and rewards, use LawDepot’s Joint Venture Agreement instead.

Who are the parties in a Referral Agreement?

There are two parties in a Referral Agreement:

The broker is the individual or company that refers businesses, customers, or service providers to the client in exchange for compensation. They’re also known as the referrer or referral party. A broker is considered an independent contractor and may require a license to operate within certain industries.
The client is the freelancer or business that receives referrals and contacts to increase sales, clientele, contracts, and more. They’re also known as the service provider, referee, or seller.

When to use a Referral Agreement

Whenever a broker generates business leads for a client, using a Referral Agreement is essential. Businesses of any size can benefit from creating these documents. Referrals can generate various leads for clients, including:

New customers needing the client’s services
Service providers clients may need for day-to-day operations
Product distributors for clients to stock their business’ merchandise

Referral Agreements can be beneficial in a variety of industries, including the following:

Insurance industry

A business with connections to people who may require insurance coverage can enter a Referral Agreement with an insurance company. For example, a vehicle dealership may refer customers to a particular insurance provider or agent. A Referral Agreement would outline how the insurance provider compensates the dealership in return.

Each state has specific requirements for referral arrangements with insurance providers. For example, Washington has set guidelines for fees and commissions under the Revised Code of Washington § 48 - 17- 490. This code states that an insurance agent, company, or producer cannot pay a commission, fee, or other monetary compensation to an unlicensed individual soliciting services. Unlicensed individuals and companies can make referrals, but there are several restrictions, including how and when compensation is provided.

Real estate industry

Referral Agreements can be beneficial in the real estate industry when a person or business has contacts needing services in the industry. The most common example is a broker referring clients to a real estate agent. Another example is a home improvement contractor referring contacts to a real estate agency.

Some real estate industry personnel must follow federal regulations when entering a Referral Agreement. For example, section 8 of the Real Estate Settlement Procedures Act (RESPA) stipulates that real estate agents cannot be compensated for referring clients to mortgage providers or title companies. A real estate agent, however, can refer a client to another licensed real estate agent for a fee.

Additionally, some states have laws that govern how brokers provide referrals in the real estate industry. For example, Florida Statutes § 475.011 restricts property management firms from paying fees to an unlicensed broker. Exceptions to this rule include certified accountants and attorneys.

Finance industry

Businesses with access to contacts needing financial services may wish to enter a Referral Agreement with a financial company. An accountant referring their clients to a financial advisor is an example of a broker-client relationship. The two parties can enter a Referral Agreement to outline the terms and compensation of the arrangement.

Clients in the finance industry must consider regulations, such as the Investment Advisors Act of 1940, when making referral payments. This law restricts who can receive compensation for referrals. Additionally, the act requires set disclosures when an advisor is being endorsed. This includes disclosing any conflicts of interest.

Automotive industry

Referral Agreements can be beneficial in the automotive industry when one party has access to clients who may need automotive services. For example, an independent hotel could refer guests to a car rental service. The hotel and rental service could use a Referral Agreement to outline how the hotel will be compensated.

State laws may restrict when an automotive company can pay for referrals. For example, in California, under Penal Code Section 551 PC, it is unlawful for automotive repair dealers to compensate insurance agents for referrals when a policy already covers repairs.

Other industries

Besides those listed above, other industries and professions can benefit from using Referral Agreements, including:

Software-as-a-service (SaaS)
Loans (except mortgages)
Film and entertainment
Construction
Recruitment
Consultants
Lawyers

In regards to SaaS companies, a broker can enter an agreement with the client to help direct referrals to their website through affiliate links and grow their client’s customer base.

Please note that industries may have state and federal legal guidelines regarding licensing requirements and referral fees that clients and brokers must follow. Check your state and federal legislation for the client’s industry and specialization. (e.g., Federal Trade Commission (FTC), Real Estate Settlement Procedures Act, Securities Exchange Commission)

Why should I create a Referral Agreement?

A Referral Agreement is a mutually beneficial contract allowing the client to receive new sources of business while the broker receives compensation for their services.

Though verbal contracts can be legally binding, written agreements are stronger and hold both parties accountable. Some industry regulations may even require a written agreement between a broker and a client.

An agreement creates transparency in the broker-client relationship while outlining the compensation and terms of the relationship. Most importantly, an agreement can be used as evidence if there are any disputes regarding the contract or services.

How to write a Referral Agreement

LawDepot’s user-friendly Referral Agreement questionnaire allows you to customize your contract. Simply choose the client’s industry and location, then continue by completing the following steps:

1. Provide service details and the term

List the services the broker will be providing to the client. These will vary depending on the client’s industry. Services can include:

Collecting new contact information for potential business
Providing brochures to contacts detailing the client’s business
Using an existing customer database to refer to the client’s services
Advertising client services (e.g., social media posts, website banners)
Providing affiliate links for the client’s services on the broker’s website

Then, specify if the broker will be involved in negotiations between the client and a referred contact. Additionally, state if this will be an exclusive contract between the broker and the client.

A contract can be created for a limited time or indefinitely until one or both parties terminate it in writing.

2. Provide party details

Next, provide the broker's and client's names and contact details. Parties in a Referral Agreement can be individuals or companies.

3. Describe the payment details

Provide details on how the broker will be compensated for their services. This includes:

Pay structure (e.g., flat fee, sales commission, fee per signed contract, pay per click, etc.)
Any sales tax
Invoicing periods and payment deadlines
Late payment interest

Depending on the client’s industry, state, and federal requirements, payment limits and commission rates may apply.

4. Outline the termination details and expenses

Specify how many days' notice each party must provide to terminate the contract if it isn’t a fixed-term agreement. Terminating the contract can be done using a document like a Termination Agreement.

Also, include any work-related expenses the client may provide the broker. Examples of costs can include fees for software or promotional materials.

5. Add a confidentiality clause

Continue by adding a confidentiality clause. This clause is optional for Referral Agreements based on the information the client must share with the broker.

LawDepot’s template allows additional clauses if the agreement or the client’s industry requires them.

6. Include signing details

Finally, include the signing date or add it later if it’s unknown. If a witness will be present during the contract’s signing, a witness signature can also be included.

Do you need a confidentiality clause in a Referral Agreement?

A confidentiality clause is optional for a Referral Agreement. Though companies handling personal data are already obligated to follow privacy laws like the Privacy Act of 1974, they may need to collect additional private information from their client.

For example, a broker may need to know a client’s Business Plan to understand how to promote the company best. Therefore, creating a confidentiality clause can protect Business Plans, trade secrets, intellectual property, and employee and client information in certain situations. This clause can give clients further peace of mind that their confidential materials are secure in the broker’s hands.

Do you need a witness when signing a Referral Agreement?

Although a witness is not a legal requirement for signing a Referral Agreement, it’s good practice to help protect the broker and client.

A witness can assist in validating signatures if there are any future disputes or misunderstandings about the agreement. Should there be any questions regarding the contract’s enforceability, a witness can also support that no forgery, coercion, or undue influence was involved while signing.

Free Referral Agreement

Create Your Free Referral Agreement

Referral Agreement

Your Referral Agreement

REFERRAL AGREEMENT

What is a Referral Agreement?

Who are the parties in a Referral Agreement?

When to use a Referral Agreement

Insurance industry

Real estate industry

Finance industry

Automotive industry

Other industries

Why should I create a Referral Agreement?

How to write a Referral Agreement

1. Provide service details and the term

2. Provide party details

3. Describe the payment details

4. Outline the termination details and expenses

5. Add a confidentiality clause

6. Include signing details

Do you need a confidentiality clause in a Referral Agreement?

Do you need a witness when signing a Referral Agreement?

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