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Affiliate agreement

This Agreement is entered by and between Jonas Adam, individually or collectively as the "Signee" and Jane Smith, as the "Signer", together referred to as the "Parties".
The Contract is dated [the date both parties sign].

1. Agreement terms

The Parties agree that the following agreement is dependent on the terms presented as follow:

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What is the definition of an affiliate?

An affiliate is somebody who sells products or services on behalf of your business to other people. You can think of them almost like an extended, third-party salesforce with whom you do not have a formal employment relationship, but who you pay on primarily a commission-only basis. Affiliate sales and relationships have been very common throughout history, and are increasingly common in the digital age with the proliferation of blogs, social media, streaming, live casting, and other means of individuals producing content and building an audience around them.


Keep in mind that an affiliate can be either an individual or a corporation. Similarly, the person hiring the affiliates can be either an individual or a corporation. Although the mix of who is hiring who does not change the core affiliate agreement a lot, it's important to know exactly with whom you are engaging in an affiliate relationship with because that will determine who the contract is made out for.


Affiliate marketing is an increasingly popular form of marketing, with both new companies like Twitch as well as many other older or more traditional companies launching affiliate programs.


What is an affiliate agreement?

An affiliate agreement formalize the relationship between you and your affiliate base. Like all agreements, it clearly outlines the expectations and responsibilities of all parties involved in a transaction that is affiliate marketing. Because an affiliate relationship is a commercial transaction, it is important to have an affiliate agreement to outline what each person needs to do to earn and be able to be paid the money.

Companies or merchants hiring contractors to perform promotion tasks to audiences that they haven't built shouldn't work under an affiliate agreement, but instead as contractor under a contractor or subcontractor agreements.

What does an affiliate agreement need to contain?

Although each affiliate agreement will vary in detail, depending on what types of products and services are being sold, where they are being sold (such as in person or over the Internet), and where the hiring business and the associate themselves is located, there are several common elements to include in all affiliate agreements.


Who is entering into the affiliate agreement

The first thing to include in an affiliate agreement, just like all agreements, is a clear outlining of exactly who the agreement is between. As mentioned above, you should know whether the person paying out and the person being paid is either an individual or a corporation. Both are able to enter into affiliate agreements with the other. You should have the individual or corporation's full legal name and contact information in the agreement itself.


Location of the hiring business and affiliate

Next, you should know where the hiring entity and the affiliate entity are both located. As with all contracts, the jurisdiction where the agreement applies will matter a lot in how it is written and how it is enforced. Especially in the United States, each individual state can have different laws on the various aspects that would impact a contract for affiliates. For example, states have different definitions of how commissions are calculated or taxed, which is an important part of the affiliate agreement, as we will see below. Things can get especially tricky if the hiring company and the affiliate are based in different countries, especially with regards to tax calculations. It's important to be very clear which geographies each party is in and which geography’s laws apply to them.


Term and termination of the agreement

Another important aspect of the contract is the terms for it being active. For example, is the affiliate in the program just because they've signed the contract? Or do they need to go through some other training or certification to be part of the program? Similarly, can the affiliate leave the program at any time, and or can the hiring company terminate the affiliate agreement at any time? Are there any restrictions, compensation, or other considerations in terminating these contracts?


Initial and ongoing responsibilities

Affiliate agreement template should also include an outline of the initial and ongoing responsibilities of the affiliate and the business. For example, is the affiliate responsible for maintaining a certain level of brand consistency and how they write about or present the business? Are they responsible for reporting certain performance metrics back to the business? Similarly, is the business itself responsible to provide the affiliates with ongoing support, resources, or performance metrics that will help them be successful? These are all things that should be considered before creating an affiliate program itself, but once decided, it will be valuable to outline clearly in the agreement itself.


Restrictions or limitations on behavior

Related to the ongoing responsibilities, there may also be restrictions in the behavior of the affiliate or the business that needs to be clearly outlined in the affiliate agreement template. For example, is the affiliate able to offer discounts or promotions related to the service or product they are an affiliate for? Are they able to change the marketing materials presented by the business to their customers? Again, these are all critical aspects of the affiliate business that need to be decided before it is started but are just as important to have clearly outlined in the agreement itself.


Compensation

One of the most important aspects of any affiliate agreement is the compensation structure, also sometimes called the commission structure. This is how much the affiliate earns for a given sale, and how that compensation may change over time as different levels of products are sold or different goals are reached. It's common for affiliate programs to have a revenue share agreement with affiliates, with the revenue share percent changing as different overall volumes of product sold. Similarly the business may run temporary promotional deals, such as during holidays or other business seasons, to promote their product even more heavily. Similarly, the business may offer incentives for new affiliates to implement the affiliate program quickly and begin selling the product to their audiences.


 Along with the initial compensation, the affiliate agreement will often include terms outlining when the commission structure can be renegotiated or changed by either party. The business itself may reserve the right to change the commission structure on a regular basis based on their business’s performance and the performance of the affiliate itself. Similarly, as the business introduces new products or services that were not initially covered under the affiliate agreement, it may have a clause in the agreement that allows them to update the agreement to include proper compensation and consideration for these new products.


Jurisdiction, breach, indemnification, and confidentiality

Affiliate agreements will also address routine business matters and possibilities that many other agreements take into account. For example, it will usually include an explicit outline of which state or federal laws will govern the program and visual payments. Similarly, it will state explicitly which governing body, such as which United States state, will be used in the event of a lawsuit or other issue to settle that dispute. Also, the agreement will outline the procedures if either the business or the affiliate ceases business operations, and how the agreement itself is terminated in that case. The agreement will also outline the procedure in the event of a default by either party. And lastly it will include all disclosure, confidentiality and indemnification clauses to protect both sides.



Why should I use an affiliate agreement?

As with any business treatment, and affiliate agreement exists to protect the interest of both parties in a mutually beneficial transaction. Also like most other business transactions, the affiliate agreement should really just be the formalization of a program that was decided before and has the interest of both the affiliate and the business in mind.


You will want to create an affiliate agreement to protect both parties in the transaction and to make it clear what will happen in different circumstances. Many businesses will have a marketing website or some other document that outlines the key terms such as the compensation structure in the requirements for joining the affiliate program in one place. Then once the affiliate is interested in the program they will be sent the entire document to review and sign. Many businesses with affiliate programs will also send out periodic updates to the agreements that reflect changing terms. 


In any case, it's best practice to have an agreement for any business transaction, especially ones including large amounts of money for other individuals or businesses using your business is intellectual property or brand to sell your product to their customers. It doesn't need to take a long time to create an affiliate agreement, and it doesn't need to be overly complex, but having a good agreement in place upfront can save both the business and the affiliate a lot of headaches down the road in the event of a disagreement.


Agency Agreements and Affiliate Agreements 

Agency agreements are far more common than most people recognize. This agent agreement allows an individual or company to work or act on your behalf legally. Entering into an agreement with a realtor or attorney is the perfect example. They represent you as you have signed an agreement allowing them to do so.

Affiliate agreements are where another party sells products on behalf of another company. Affiliate marketing is a very common practice where a website hosts a product only to take a percentage of the overall sales price. Below are some important aspects to note about agency and affiliate agreements:

  • An agency agreement or affiliate agreement has to be laid out with terms in a clear way. Lack of terms or specifics can lead to conflict in the relationship between two business entities. 
  • Confidentiality is also very important as a company might not be ecstatic that their project is being contracted out overseas.
  • Both agreements are to protect all parties involved. The compensation part of the agreement tends to produce the most conflict on average. 

Entering into an agency or affiliate agreement is a common practice, it is just important to have a professional help write up this legal document. 

Sponsorship Agreements and Affiliate Agreements 

Sponsorships are very common as companies sponsor charity events or conferences frequently. Influencer marketing has also seen a huge influx of sponsorship agreements with influencers with large online followings. With all of the current possibilities for sponsorship, an ironclad agreement must be drawn up.

Below are common practices to ensure that both parties are protected in sponsorship and affiliate agreements:

  • The confidentiality portion of sponsorships is far less important than in affiliate agreements. Influencers are required to indicate if they have been compensated for a particular post.
  • Exclusivity is important as well as no business wants to enter into business with a person or company that is helping a direct competitor. 
  • Terms for contract termination should also be outlined in both agreements.

A sponsorship agreement can be simple or complex depending on the type of sponsorship occurring. Outlining rules and the overall structure of both of these agreements is imperative. 

Consignment Agreements and Affiliate Agreements 

A consignment agreement occurs when a company or individual wants to designate a salesperson for their product. The agreement will state that the owner of the product will not lose ownership or intellectual rights to the product. Unlike a vendor agreement, the consignee keeps the inventory of products until they are sold. The consignee receives payment after the goods have been sold which will be outlined in the agreement. 

Below are the similarities and differences between consignment and affiliate agreements: 

  • Affiliates sell products on their platform but are not responsible for hosting the product inventory. They are paid on a commission-only basis while consignment agreements might pay fees like storage due to possession of products. 
  • If the goods are not sold the consignee does not retain possession.

The differences in the agreement are affiliates do not have actual possession of products. They simply provide a platform to sell on whether it is a blog, website, or podcast.

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