Introducer, Commission and Fee Agreements

April 2008

New customers, clients and suppliers are essential to any business, but can often prove a difficult thing to attract or find the right match.

Third party introductions is an important method of expanding a business' network, helping to bring in new customers and source to new and cheaper or more reliable suppliers.

It may be the case that you do not have the resources, time or direct connections required to build a business relationship with the kind of potential customer/supplier that you are targeting, but you know someone who is in a position to introduce that potential customer/supplier to you. It may simply be that you wish to increase the amount of word-of-mouth referrals made to your business through measured incentives.

It is important to lay down the basis of such an introducer arrangement in writing, setting clear expectations and ensuring that the basis on which the fee or commission is earned is unambiguous.

Simply-docs has created a range of new introduction, commission and referral fee agreement templates, designed to cater for a variety of different scenarios and methods of customer/supplier introductions.

Commission Agreement

This agreement is designed to cover the situation where a supplier is seeking new customers generally, with no specific criteria for those new clients. The introducer will either refer potential customers on to the supplier or take contact details from potential customers and pass them on to the supplier to act on, depending on which method best suits the way the business operates. Under this agreement, the introducer will receive a commission for all business generated from each customer introduced within a set period from the date that the customer is introduced.

Referral Fee Agreement

This agreement works in a similar way to the Commission Agreement. The Referral Fee Agreement differs however in terms of when the introducer earns his fee. Under this arrangement, the referrer will earn a fee only for the introduction itself, or for the first transaction between a customer introduced by him and the supplier, rather than all of the transactions between a customer and the supplier. Once the introduction has been made, or first transaction completed, the referrer will earn no further fee in respect of that customer or client.

Introducer Agreements

The Introducer Agreements differ in their application from the Commission Agreement and Referral Fee Agreement. These agreements are designed for the situation where the supplier wishes to obtain only one new customer, usually for a specific or large transaction, or in order to begin trading in a new market or location. There are two versions of the Introducer Agreement: Fee for Single Transaction; and Fee Upon Establishing Ongoing Business Relationship. Under the Single Transaction version, the introducer will earn a fee upon the completion of a transaction or agreement between the supplier and the new client. Under the Ongoing Business Relationship version, the introducer will earn a fee or commission only after a certain number of transactions, which are taken to establish that there has been established an ongoing relationship between the supplier and the new client.

The Introducer Agreements are drafted so as to be capable of targeting a specific and named prospective client or an unidentified client which meets criteria specified by the supplier.

Agency

These Introducer Agreements are not agency agreements and do not give the introducer power to bind the supplier in any way. All sales will be conducted by the supplier itself. If you require an agreement which establishes a relationship between a principal and an agent, Simply-docs also has a range of agency agreements, also available under the subscription to the Trading folder.

The contents of this Newsletter are for reference purposes only and do not constitute legal advice. Independent legal advice should be sought in relation to any specific legal matter.

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