Affiliate agreements and affiliate contracts are essential to the operation of a business. If you run an affiliate program or you want to form a new affiliate relationship for your own business, you need to know how these commitments work and how to document the agreements that you enter into. There are many affiliate agreement templates out there to use for your business affiliate form, but you need to be sure that you are aware of what needs to be included in these documents before choosing a template.

Affiliate Agreement
Affiliate Agreement Download for Word

Affiliate Agreement Templates

What is the Legal Definition of Affiliate?

In legal terms, an affiliate relationship is a business relationship that is legally binding between two parties. One party is the affiliate and receives compensation for promoting the other. The company that manufactures and sells the promoted goods is often referred to as “the company” to eliminate confusion with the affiliate companies promoting its goods and services.

Technically, per the letter of the law, an affiliate is an organization, an individual person, or a business that is controlled by a third-party relationship. In this case, affiliate relationships apply to sales that are generated by the affiliate for the parent and also to the way that marketing and branding are done by the affiliate business. These two businesses are not business partners in any other sense of the word, and there is no formal arrangement between the two companies to do business together other than through the mutually beneficial sales of specific items.

When this relationship exists between these two businesses, the affiliate helps promote the company’s products, and then they are paid a share of the profits related to the sale of any goods related to their efforts to advertise. The sales of these goods are uniquely identified through the use of “codes” that identify sales as being related to the efforts of each individual affiliate. These codes must be used when the person purchases the item for the affiliate bonus to be paid out.

In other affiliate programs, traffic that is generated to the parent company site is tracked, and the affiliate company is rewarded for this effort through a different compensation scale. Many affiliate programs reward for both of these metrics, which means that all of the efforts of the affiliate company to promote the parent company deliver benefits. This is a great way to make sure that your business is marketed effectively without the need to spend a lot of money on your own unique advertising.

Affiliate Contracts

Do I Need an Affiliate Agreement?

An affiliate agreement is the best way for companies to promote their products in a cost-effective way, and the bonus that is paid to affiliates that are promoting the company is a big benefit that drives efforts to promote these products. If you have the kinds of items that are readily promoted by influencers and other businesses, setting up an affiliate program can be a great way to get more sales of your goods and services while also increasing the visibility of your brand.

You will need to be aware that an affiliate program is very time-intensive to set up, but the rewards of taking the time to do so can be very worthwhile. There are various considerations that need to be made related to payment of the affiliates in your program as well as how they are allowed to promote your brand. All of these items need to be laid out in an affiliate agreement so that there is no confusion down the road about compensation or promotion.

Brand protection is one of the main considerations that need to be included in your affiliate agreement. You do not want to allow affiliates to position themselves as the maker of your goods and services, and you also need to be sure that their efforts to promote products are not meant only to benefit their own marketing efforts.

An affiliate agreement is critical if you are going to be making payments to other businesses or individuals who are helping to advertise your products. This agreement will protect your interests if there are disputes of any kind with the affiliate, and the agreement also details pay and other considerations that should not be left to guesswork. Your affiliate agreement documentation is key to the operation of this kind of promotional program and to the prevention of legal wrangling over payments and negotiations.

Business Affiliate Forms

What Should be Included in An Affiliate Agreement?

An affiliate agreement has to be carefully drafted to ensure that there are no mistakes related to the payment of affiliates. This document also guides the way that affiliates are allowed to promote your products which can be critical to protecting your branding presence.

There are also payment details that will need to be outlined. This is particularly important if you are offering various kinds of affiliate relationships or different levels of affiliate payout. Many companies have different levels of commitment that are offered to affiliate companies, or companies might earn their way into different categories that offer perks related to increased sales volume and increased referred traffic.

You will need to be sure that your affiliate agreements include details about the payouts for engagement alone as well as for conversions to sales. The kinds of sales can also be paid out on differently, so if you are using codes for sales drivers or just simple engagements with your website, you need to outline how all of these various kinds of website and sales traffic are paid out on.

Other important determinations that you need to add to your affiliate agreement is information about licenses that are required for both parties involved in the affiliate relationship and control over any involved intellectual property. You will also need to address commission renegotiations and any state or federal laws that govern the way that compensation is paid out.

Many affiliate agreements also reference which governing body is used to hear legal cases related to the affiliate agreement and what the procedure will be in the event of a default by either party. You might also include clauses that protect both parties from actions caused by the other company involved in the affiliate relationship.

Affiliate Agreement Samples

How Does Compensation Work in an Affiliate Agreement?

Most affiliate agreement program structures will outline the following details to help to define how payments to affiliates should be made:

  • Site traffic
  • Average number of sales
  • Conversation rate to company’s site
  • Traffic to an affiliate site
  • Percentage of users that click on the company’s website

These details, along with the actual sales figures from direct code sales, can help to define the way that the affiliate program will pay out to affiliates. All of this information needs to be made available to potential affiliates before they join the program. Affiliates need to be apprised of the details of what they are agreeing to before they are asked to sign a contract. The more that your potential affiliates know about the program, the more likely they will be to join.

Affiliate agreements can be made to work in nearly any way that suits your business style. You will be able to determine what you want to pay out for each kind of affiliate sale or conversion, and you can also decide if you want to have tiers of affiliate membership and other kinds of unique arrangements with your affiliates. All of these different program decisions need to be carefully outlined in your affiliate agreement to prevent confusion or legal action from being taken against your business.

Many affiliate programs offer different payment thresholds that can be used to trigger additional payouts. This is one of the ways that you can automatically reward top sellers as your program increases in size. The frequency of payment can also be impacted by changes in the loyalty of affiliates, and you might choose to offer different ways of compensating your affiliate members. All of these details need to be laid out carefully in your affiliate agreement, and the agreement might have to be amended or signed again if changes are made to the way that payments are given to a specific affiliate.

The more flexible your affiliate agreement boilerplate is, the more likely you will be to have an affiliate agreement that is correct for every affiliate relationship that you have entered into. These kinds of details can make all the difference in the management of your relationship with your affiliate members, and you will avoid legal strife and confusion if you keep all the relevant details of your affiliate’s contracts and payouts up to date in your documents.

Affiliate Agreements Are Essential to Healthy Business Operation

If you are planning to offer an affiliate program for your business, you need to be sure that you have a proper and well-crafted affiliate agreement in place for your program. You need to remember that this is a legally-binding agreement that you and the other business are entering into, and there must be documentation about the agreement to protect your business from legal action down the road. The affiliate businesses or individuals will also be far more motivated to work with your company if they are able to tell that their own interests are carefully detailed in the affiliate agreement as well.

Operating an affiliate marketing program can be a really great way to increase sales and also support affiliate companies at the same time. However, this kind of agreement can be really difficult to operate and manage without proper documentation. Make sure that you are not running an affiliate program that is full of loopholes and items that need clarification. The best way to prevent confusion and problems with your affiliate marketing partners is to have a quality affiliate agreement in place for your affiliate program.

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Tagged:AffiliateAffiliate AgreementAgreementBusiness AffiliateContractLegal
TemplateLab December 9th, 2022
Ryan Duffy
Ryan Duffy