Description

Commercial Referral Fee Agreement

Summary

This Commercial Referral Fee Agreement, drafted from the seller’s perspective, contemplates the referral of sales leads for general commercial transactions. Sometimes, a seller of goods or a service provider (seller) bolsters its formal sales network by implementing a formal or informal referral program. Through this referral program, the seller can pay a referral fee, also called a finder’s fee, to anybody (a finder) who is not a formal sales representative and makes an introduction or discovers an opportunity that results in a sale.  Additionally, this referral program can leverage the seller’s extended network, including its employees.

Details

A referral fee rewards somebody who initiates a relationship that leads to a sale, but who typically does not actually participate in the sales contract negotiations. For example, unlike a sales representative, a finder does not:

• Contact sales leads generated by the seller.
• Actively engage in the sales process, including making sales presentations.
• Solicit customer orders for seller approval.
• Act as liaison between the seller and the customer to further:
  • the sales process;
  • after-service;
  • resolution of collection matters; and
  • resolution of disputes.

Assumptions

This Commercial Referral Fee Agreement assumes that:

• The parties to the agreement are US entities and the transaction takes place in the US. Parties may need to modify these terms to comply with local laws.  Thus, parties should consider modifying these terms if organized or operating in a foreign jurisdiction.  Additionally, parties should consider modifying these terms if their transactions take place in a foreign jurisdiction.
• The agreement contemplates the payment of cash compensation only. The payment of any finder’s fee in the form of non-cash compensation, such as stock compensation, options, and warrants, is beyond the scope of this Agreement.
• These terms are not industry-specific. This Agreement does not account for any industry-specific laws, rules, or regulations that may apply to certain transactions, products, or services. For example, referral agreements in:
  • the accounting industry may be proscribed or greatly restricted; and
  • the securities industry may raise the issue of whether the finder must register as a “broker” or “dealer” within the meaning of the Securities Exchange Act of 1934.
• The finder is an independent contractor. This Agreement contemplates that the finder is an independent contractor, rather than an employee of the seller. Moreover, engaging an employee to provide referral services may entail legal and regulatory issues that are beyond the scope of this Agreement.