Affiliate Agreement

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Affiliate Agreement

A Brief Introduction About the Affiliate Agreement?

An affiliate agreement is an agreement that is entered into by an affiliate (which may usually be a website or a publisher) and an advertiser. This means a person, an establishment, an organization, or even a website which is a commercial entity and has a contractual relationship with another but a larger entity or a group or an organization.

The legal definition of affiliate agreement puts into writing the terms and conditions between an affiliate, who generally is an ‘independent contractor’, and the advertiser, who in most cases is a larger entity, where the former agrees to market the product/brand of the latter, without forming any separate legal entity or a joint venture. This agreement may also be called an ‘affiliate program agreement.’

This arrangement is intended to benefit both the parties to the agreement. The advertiser markets or promotes the products through the affiliate who in turn receives commissions for the same.

Who Take the Affiliate Agreement – People Involved

The people involved in an affiliate agreement are the advertiser who wishes to market his products through the affiliate and the affiliate who is a website or a publisher who earns a commission for advertising the products of the advertiser.

Purpose of the Affiliate Agreement – Why Do You Need It?

The purpose of an affiliate agreement is to lay down the terms and conditions of the affiliate relationship. The agreement defines both the parties’ duties and responsibilities as well as the structure of the pay-out or commissions, which are generally determined by the number of people who click on the advertiser’s link on the affiliate’s site. When a visitor goes to the advertiser’s site through the link on the affiliate’s site, the affiliate earns commissions based on the sales that are made on the advertiser’s site. The agreement will lay down how much commissions will accrue and how they will be payable to the affiliate.

An affiliate agreement can be created for any kind of business, whether it is a big company or a small sole proprietorship. When an affiliation is created with a company that has a large reach and a large customer base, it is a wonderful way for the advertiser to make sure his business reaches as many people as possible.

The purpose of the agreement is to provide a framework for how the transactions between the affiliate and the advertiser will be carried out and how every aspect of the affiliate relationship will be dealt with. Many such issues where the affiliate link will be displayed, what technology shall be used for tracking of affiliate information will be included in the agreement itself and will be clearly defined. This agreement is important as it gives effect to the intention of the parties and gives a legal basis for any action that they take.

Contents of the Affiliate Agreement

This agreement contains the terms and conditions of the relationship between the affiliate and the advertiser.

A clause named ‘purpose of the agreement’ is a very important clause in the agreement. It will talk about the reason for which the agreement has been created and what purpose the parties wish to achieve. This agreement need not only be for a commercial purpose. Such an agreement can be created between institutions, universities, or not-for-profit organizations to foster academic or research activities.

Another important clause is the one that talks about the payment or the commission structure. This clause will define how much percentage of commission the affiliate is entitled to out of the sales generated by the advertiser. It will also state how such payment will be made and the time frame for such payment.

The agreement will also, in many cases, have a clause titled ‘contents in the affiliate site.’ The clause will lay down what content is acceptable on the affiliate site and what is not.

Apart from this, the agreement will contain all the necessary clauses such as the names of both parties, the duration of the agreement, and what the responsibilities of each party shall be.

There will also be a list of representations and warranties made by each party. The agreement will outline under what grounds the agreement shall be terminated. Other boiler-plate clauses such as indemnification, liabilities, jurisdiction, and intellectual property rights also must be included. Through the intellectual property rights clause, the affiliate is given a non-exclusive, non-transferable right to use and market the product of the advertiser. These rights will remain in existence as long as the agreement is valid.

How to Draft the Affiliate Agreement

The following are the steps to follow while drafting an affiliate contract:

  • The advertiser shall decide which affiliate site is best suited to his needs and which site or publisher will give his products the most visibility and exposure.
  • The advertiser shall negotiate with the affiliate with respect to how the affiliate shall promote the products of the advertiser and how much commission shall be payable to the affiliate for the same.
  • A simple agreement shall be drafted encompassing all the terms that have been agreed to between the parties.
  • All the important clauses such how the commission is to be calculated, how the intellectual property rights of the advertiser are to be used by the affiliate etc. shall be included in the agreement.
  • The agreement should provide a list of what acts shall amount to a breach of the agreement by either of the parties and must provide a remedy for the breaches. It must also lay down the circumstances under which the agreement may be terminated before the term is completed.
  • The agreement shall be thoroughly reviewed by both parties to make sure that their rights and interests are adequately protected.

Negotiation Strategy

  • The basic negotiation strategy is to ensure that the agreement is fair to both parties and that their interests are protected.
  • It must be negotiated such that the agreement is fair and balanced and benefits both parties.
  • The agreement provides fair compensation to the affiliate for marketing the products of the advertiser.

Benefits of the Affiliate Agreement

The following are the benefits and drawbacks:

  • Through this agreement, the advertiser gets a platform to market and promote his products. This gives the advertiser access to a much wider audience and increases the exposure of his products.
  • If such an affiliate program is in place, the advertiser does not have to spend a huge amount of money on promoting his products. This is an easier and relatively cheaper way to market his products.
  • The affiliate gets the opportunity of earning money through providing links to the advertiser’s site.
  • The agreement puts into writing the payment structure and how the commission will be paid to the affiliate. This makes the transaction crystal clear and avoids any dispute or confusion between the parties in the future.
  • Through the agreement, the advertiser gets the right to terminate the agreement in case of any breach on the part of the affiliate. In the absence of such an agreement, there will be very limited remedies available to the advertiser if the affiliate breaches the applicable terms and conditions.

[Also Read: Web Advertising Agreement]

What Happens in Case of Violation?

Generally, These agreements have a clause that talks about the grounds under which the agreement may be terminated. This clause states that if the affiliate breaches any of the clauses of the agreement or any of the terms and conditions of the affiliate program or it violates any applicable law, the advertiser can immediately terminate the agreement.  The affiliate will also forfeit any accumulated earnings that have not yet been received.

The advertiser has the absolute right to make sure that the affiliate is using the intellectual property rights and licenses provided by the advertiser for the purpose intended and not for any other reason. If there is any breach by the affiliate, the advertiser may revoke such licenses immediately.

The agreement can also mention that all disputes arising out of the agreement will be subject to the exclusive jurisdiction of a specified court.

In conclusion, this agreement is extremely important to put into writing the terms and conditions of how an affiliate program will function. Various details such as the payment terms, method of payment of commission need to be laid down and this is where an affiliate agreement comes into play. The duties and responsibilities of both parties are laid down to avoid any confusion in the future. The advertiser may also terminate the agreement if any clause of the agreement is breached by the affiliate(1). Hence the advertiser has the right to make sure that the affiliate is following all the terms of the agreement and the affiliate program.

By signing the affiliate agreement, the affiliate acknowledges abiding the company’s policies and market/publicize the company’s product/brand mentioned in the agreement. The agreement being a ‘quid pro quo’ in nature(2), in return, the affiliate earns commissions/incentives on every referral/sales through it.