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A Guide to Referral Agreements

A referral-based partnership is a simple yet popular proposition where a party refers customers to a business for a reward. Companies often use referrals for customer acquisition, and referrers use referral rewards to build a consistent source of income. Binding the business and the referrer is the referral agreement.

What is a Referral Agreement?

A referral agreement is a contract between Party A (the referrer), who will refer customers to Party B (the business) for a reward. Referral agreements can also be drafted in a way where both parties refer clients to each other.

A referral agreement is essential for both parties because:

  • It helps protect the reputation of a business from poor referrals or unhappy customers.
  • Ensures the referrer gets fairly compensated for their referral.

What Does a Referral Agreement Include?

All referral agreements include name and contact details, while most referral agreements include the following key clauses:

  1. Nature of Agreement: This clause denotes who will be the referrer and the referee. Clarifying the role of the parties involved in the agreement outlines obligations and prevents misunderstanding.
  2. Exclusivity: You can include an exclusivity agreement to prevent your partner/referrers from working with other businesses. An exclusivity clause can help you maintain your competitive advantage over your rivals.
  3. Duration of Agreement: You should also state the term of the agreement. Agreements can be short-term (less than six months), long-term (over six months) or ongoing. Ongoing agreements typically have a referral quota, and you can insert that into the contract for additional clarity.
  4. Referral Process and Rewards: You must also include how a party can sign up for your referral program and an exact calculation of how much the referrer will get paid. Payments can either be flat-rate/per referral or a percentage of income you receive per referral.
  5. Intellectual Property (IP): This clause should dictate if the referrer is allowed to use your IP to promote your business and in what capacity. Specifying how the referrer can use your IP protects your business against IP misuse.
  6. Confidentiality and Privacy: This clause states you’re complying with privacy laws and keeping confidential information about the referrals safe.

How to Draft and Execute a Referral Agreement?

Hiring a commercial lawyer is the best way to draft a referral agreement. However, while the lawyer can assist you in preparing the agreement, they won’t always be able to execute it — especially if the referrer is in a different jurisdiction.

To ensure the referral agreement remains valid and executable in different jurisdictions, you may have to entrust third-party online services to amend the agreement, protect confidential information, and handle digital signatures.

Overall, executing a referral agreement the “standard” way not only increases your expenses but is also risky and inefficient. This is why PAID recommends binding and executing your referral agreement on the blockchain.

Why A Referral Agreement on the Blockchain?

A blockchain-based referral agreement offers the following advantages:

  1. Efficient: Through smart contracts, self-executing code that triggers when the agreement is signed, your referral agreement is valid immediately, thus improving efficiency.
  2. Secure: No more trusting hackable, cloud-based third-party services with contact details, agreement terms, or digital signatures. Blockchain technology is cost-efficient and highly secure.
  3. Immutable: Once an agreement has been signed it can neither be altered or lost. This is especially useful for dispute resolutions.

PAID DApp and the Referral Agreement

The referral agreement helps new entrepreneurs and freelancers protect themselves and navigate a highly globalized economy. It is going to be one of the many contract templates that PAID Network will be offering as part of the release of PAID DApp. These on-chain solutions will ensure our community is protected, allowing you to safely choose from a variety of templates to secure your business interests and #GETPAID.

The launch of PAID DApp, will be another step in the creation of the decentralized world. It leverages the power of the blockchain, demonstrating the disruptive impact of this new technology. With our referral agreements, NDAs, and other templates, PAID is showing that on-chain solutions can play a major part in disrupting and enhancing legacy legal services.

Is a referral agreement not the right type of document for your business? Check out our guide on the CIIAA, mutual NDAs, Consulting Agreements, or Advisory Agreements.

About PAID

PAID Network seeks to redefine the current business contract, litigation, and settlement processes by providing a simple, attorney-free, and cost-friendly DApp for users and businesses to ensure they #GetPAID wherever they are in the world.

PAID technology leverages Astar to operate on both Ethereum and Polkadot ecosystems. PAID makes businesses exponentially more efficient by building SMART Agreements through smart contracts to execute DeFi transactions and business agreements seamlessly.

PAID streamlines backend legal operations with SMART Agreements, so that projects can focus on making their brand bigger and better.

For any questions for the PAID network, please feel free to reach out to us on our:

Website | Telegram | Twitter | Medium

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PAID Network seeks to redefine the current business contract, litigation, and settlement processes by providing a simple, attorney-free, and cost-friendly DApp for users and businesses to ensure they #GetPAID wherever they are in the world.

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