What are affiliate agreements?
An affiliate agreement, also sometimes called an affiliate contract or affiliate program agreement, is a legally binding contract between a merchant (or company) and an affiliate (or individual) that allows the individual or company to promote the company's products or services in exchange for a commission on the sales or leads they generate. In particular, it sets out the affiliate's responsibilities, what the affiliate is allowed to do, and the merchant's expectations from the affiliate.
The affiliate agreement is an important document because it sets out the parameters of the affiliate relationship and protects both the merchant and the affiliate from misunderstandings or disputes down the road.
Most affiliate agreements are between online retailers and the website or blog owners who promote their products. The terms of the agreement can vary depending on the company and the agreements can be written or oral.
There are three parties in an affiliate agreement: the business, the affiliate, and the customer. All three parties benefit from the arrangement.
Are affiliates employees?
Affiliates are not employees of the merchant or company that they work for. Instead, affiliates are workers classified as independent contractors. They do not receive the perks of being an employee and have the freedom to make decisions for themselves to an extent. Meaning, as the IRS notes it, there is only a right to control or direct the result of the work but not what will be done and how it will be done. For this reason, affiliate agreements can help define the relationship.
What are the benefits to having an affiliate agreement?
The business benefits by getting exposure to a larger audience than they could reach on their own. They also save money on advertising and marketing costs.
The affiliate benefits by earning commission on sales or leads generated. This can be a very lucrative arrangement if the affiliate is good at promoting the business's products or services.
The customer benefits by getting exposed to businesses and products they might not have found on their own. They also benefit from the convenience of being able to buy products or services from a single source.
In summary, all three parties benefit from an affiliate agreement. The business gets exposure to a larger audience, the affiliate earns commission, and the customer gets exposed to businesses and products they might not have found on their own.
What provisions should an affiliate agreement contain?
When it comes to affiliate agreements, there are a few key elements that should be included in order to make sure that both parties are protected. Here are a few things to keep in mind when drafting an affiliate agreement:
1. Definition of terms.
The agreement should define the meaning of key terms used in the contract, such as "Affiliate," "Merchant," "Products," and "Services." This may seem like a no-brainer, but it's important to be clear about who exactly is an affiliate, for example. Is it anyone who promotes your product, or just people who have a specific relationship with your company?
2. Relationship of the parties.
The agreement should identify that the affiliate is an independent contractor and not an employee of the merchant.
3. Grant of rights.
The agreement should grant the affiliate the right to promote the merchant's products or services on the affiliate's website. This outlines how the affiliate is allowed to promote the company's products or services. For example, some companies may only allow the affiliate to use banner ads, while others might allow the affiliate to use any promotional methods they choose. Or for example, it may limit the license on trademarks and copyrighted material to protect a merchant’s intellectual property.
4. Obligations of the affiliate.
The agreement should explain that the affiliate is responsible for the content of its website and that the affiliate will not engage in illegal or unethical activities. It may also limit their rights, for example by a non-compete clause, which will protect the company from affiliates who try to promote competing products.
5. Obligations of the merchant.
The agreement should provide that the merchant will provide the affiliate with product information and promotional materials.
6. Term of the agreement.
The agreement should contain the duration of the contract and how it may be renewed.
The agreement should outline the percentage of the sale that the affiliate will receive. For example, if the commission is 10%, and the affiliate sells a product for $100, the affiliate will earn $10.
8. Payment schedule.
The agreement should detail when the affiliate will be paid their commission. This can be a lump sum payment at the end of the month, or it could be a percentage of sales made each day.
The agreement should address exclusivity, which comes with several considerations. First, you need to decide if you want to be exclusive with one affiliate or not. It may be more beneficial to you to be exclusive with just one affiliate. This way, you can build a stronger relationship with that affiliate and you can offer them more support. On the other hand, if you're not exclusive with any affiliates, you can work with multiple affiliates and reach a larger audience. Second, you need to consider what type of exclusivity you want. There are two types of exclusivity: geographic and product. Geographic exclusivity means that you would only work with affiliates in a certain area. For example, you might only work with affiliates in the United States. Product exclusivity means that you would only work with affiliates who sell certain products. For example, you might only work with affiliates who sell women's clothing. Third, you need to think about the benefits of exclusivity. One benefit is that you can offer your affiliates more support. If you're exclusive with one affiliate, you can provide them with more resources and help them to be successful. Another benefit is that you can negotiate better terms with your affiliates.
The agreement should outline the termination options. The clause may provide that the agreement can be terminated by either party at any time, for any reason.
Finally, have both parties sign the agreement.
Get Help From an Affiliate Agreement Lawyer in Florida
Affiliate agreement cases can be complex. Merchants should be prepared to seek professional guidance and support. If you have any specific questions or concerns about an affiliate agreement, contact an experienced Florida contract law and employment law attorney for immediate assistance.
COMING SOON: Download an Affiliate Agreement Template Today
For those of you who wish to “go it alone” as we often say, then you may be interested in downloading our Affiliate Agreement template, drafted by the lawyer for your use. Just download, fill in the blanks, and take it from there — whether that’s hiring a lawyer to review and/or presenting to the other party. All part of our mission to empower you with the tools and resources you need to best protect what matters.