An affiliate marketing agreement is a contract between a business and an individual or company who agrees to market or promote the business in exchange for a commission amount. According to corporate law and taxes, an affiliate is defined as a company that is related to another company often in a subordinate role. For companies to be affiliated, one must have control over the other or both must be controlled by a third company.

In the online marketplace, an affiliate refers to a person who will sell or promote the products of an online business, a term often referred to as affiliate marketing. Amazon uses multiple affiliates, referred to as "Amazon Associates," who sell items on their website. As part of the bargain, Amazon will take a small fee for their services. Both parties are able to earn income in this way.

In the broadcasting field, local televisions stations are often affiliates of larger national networks. In these agreements, stations will remain locally owned but will utilize both the national network's content and advertising. It is important to realize that an affiliate is not a part of the company that it is affiliated with, but rather, an independent contractor.

Affiliate Marketing Agreement

An affiliate agreement can be created for any type of business, whether you are a corporation or sole proprietor. Creating an affiliation with a company or individual with a large customer base and a proven track record is a great way to promote your business. Always draft the agreement so that each company will understand their obligations and responsibilities to avoid future legal conflicts.

For companies who have an affiliate program, you will often have a standard boilerplate agreement that is required for all new affiliates to sign. Two of the most vital parts of your agreement that should be included in your contract are the legal and monetary stipulations.

Things to Include in Your Affiliate Agreement

When creating an affiliate agreement, include specific items to make sure that your contract will protect your interest. Items that should be included in an affiliate agreement are:

  • The terms of the agreement
  • Under which circumstances the agreement can be terminated
  • The relationship of all parties
  • The responsibilities of both the affiliate and the business
  • The types of promotional and advertising that the affiliate can utilize
  • The restrictions on the affiliate's use of promotional material
  • Licenses that are required by both the business and affiliate
  • Who will own any necessary licenses
  • Who has ownership over any intellectual property
  • The restrictions on the use of the intellectual property
  • When and how the affiliate payments will be made
  • If and how the commission can be re-negotiated
  • Any state or federal laws that would govern the transaction
  • What governing body will be used in the event of a lawsuit
  • The procedure if either party ceases business operations
  • The procedure in the event of a default
  • A section regarding nondisclosure and confidentiality of the proprietary agreement
  • An indemnification clause that protects either party from actions caused by the other

Issues to Be Addressed in an Affiliate Marketing Agreement

There are some issues that will often come up when creating an affiliate marketing agreement, and these items should be considered when drafting an agreement. Some of the areas that should be addressed and clearly defined include:

  • The expected commission amount as well as how often they can expect payment
  • The trademark regulations that cover the process for affiliates bidding on keywords in search engines
  • The rules and procedures as to where an affiliate link can be displayed
  • The policy for affiliate emails and rules they follow surrounding it
  • The use of adware by affiliates
  • Press related issues such as using the original merchant name in press releases
  • The technology that will be used for tracking and reporting of affiliate information
  • The grounds and procedures for the affiliates

Most affiliates may not read through the entire agreement, so it may be best to provide an affiliate FAQ or easily digestible version of the terms that they can easily read through in addition to the formal document.

If you need help with an affiliate marketing agreement, you can post your legal need on UpCounsel's marketplace. UpCounsel accepts only the top 5 percent of lawyers to its site. Lawyers on UpCounsel come from law schools such as Harvard Law and Yale Law and average 14 years of legal experience, including work with or on behalf of companies like Google, Menlo Ventures, and Airbnb.