Affiliate Agreement

What Is An Affiliate Agreement?

To understand the term ‘affiliate agreement’ it is important to know the meaning of the term ‘affiliate’. In layman terms, an ‘affiliate’ is a person, an establishment, an organization or even a website which is a commercial entity and has a contractual relationship with another but larger entity or a group, an establishment or an organization.

Affiliate agreement refers to an agreement of 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.

By signing the affiliate agreement, the affiliate acknowledges to abide by 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, in return, the affiliate earns commissions/incentives on every referral/sale through it.

An affiliate agreement is also known as an ‘affiliate program agreement’.

Affiliate Agreement – The Concept

The concept of an affiliate agreement is of a ‘mutual benefit’. The parties intend to profit/benefit from this arrangement. In a commercial agreement, the party who gives the affiliation aims to market/publicize/promote his/her product through an affiliate who acts as an agent and in return earns commissions. In this era of increasing globalization and competition, affiliate agreements only aim to give more opportunities to the parties to benefit from the mutual co-operation to increase the productivity out of the agreement.

Purpose Of An Affiliate Agreement

An affiliate agreement is an agreement between two parties setting out terms and conditions between the two parties which defines and governs the affiliate relationship. The affiliate agreement specifies the obligations of both the parties including the duration of the agreement, payment terms and commissions for conversions to be paid to the affiliate on the basis of sales or traffic to a website etc. The affiliate agreement need not only be for a commercial purpose. For example, an affiliate agreement can be effected between institutions, universities, not-for-profit organizations to foster academic or research activities. The agreement, in conclusion, defines the relation between the parties where the affiliate acknowledges understanding of the company/institution’s policies and promoting the same.

Affiliate Agreement: The Essentials

Before entering into an ‘affiliate’ agreement’, there are certain important points which the parties should look out for to avoid ambiguity. The key elements in an affiliate agreement are as follows –

1. Name of the client company/institution/organization.
2. Name of the affiliate company/institution/organization.
3. Enrollment.
4. Responsibilities of the parties concerned.
5. Duration of the affiliate agreement.
6. Terms and Conditions of the affiliation agreement which includes indemnification, liabilities, representation and warranty, and Intellectual Property Rights. The detailed explanation is given below –

   (a) Indemnification – This clause discusses as to who is going to indemnify the other in the event of loss, claim, demands, damages, judgments, settlements, costs, and other expenses (which includes attorneys’ fees and costs).

   (b) Liabilities – This provision discusses as to when and under what circumstances will the party be liable.

   (c) Representation and Warranty – Representations and Warranties are a series of clauses inserted into the agreement that elucidates the facts which inspired both or either side to come to an agreement. So, if there is a misrepresentation on behalf of any party, they will be held liable.

   (d) Intellectual Property Rights – Simply put, this clause gives the affiliate non-exclusive, non-transferable right to use/access/market the product of the other party. Such rights exist as long as the agreement is valid. If the affiliate is found to alter, modify or manipulate the intellectual property concerned, he might be held liable subject to the terms agreed to in the contract.

7. Grounds for Termination of the affiliation agreement and consequences/pecuniary damages arising out of it.
8. Governing Law(s), i.e. the relevant law which would govern the agreement
9. Jurisdiction, in case any dispute arises.

Apart from the above common essentials, the clauses below mentioned are only for a commercial purpose.

The first clause to look out for is the ‘purpose of the agreement’. The nature of the agreement need not necessarily be for a commercial purpose.

The second clause essential is the ‘Payment/Compensation/Commission Structure’. This is the cornerstone for not only affiliate agreements but any agreement as a whole. The payment terms of the agreement is usually defined in percentage to be paid within a particular time framework.

The third essential clause is the ‘mode(s) of payment’ via which the party/affiliate can cash out the commission/monetary benefit accrued. It should specifically mention what mode of payment as different affiliate agreements offer various payment options including whether that payment mode is chargeable directly to the affiliate or not.

If the agreement is between an advertiser and an affiliate (generally a publisher or website), the agreement must contain a clause for the ‘Contents in the Affiliate Website’. This clause should mention what is, or is not, acceptable content on an affiliate site.

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