What is an Introduction Agreement?
An Introduction Agreement is a contract that offers protection to a business that sources goods from a manufacturer on behalf of a client and is therefore acting as the “middleman” in the deal.
An Introduction Agreement can be between a client and a sourcing company, whereby the sourcing company agrees to source products up to a certain quality and the client is prohibited from contacting the manufacturer directly.
Alternatively, an Introduction Agreement can be between a sourcing company and a manufacturer, whereby the sourcing company requires the manufacturer to supply goods of acceptable quality and prohibits the manufacturer from contacting the client directly.
What are the advantages of an introduction agreement?
- One of the main advantages of a referral agreement is that a business only has to pay the third party if the referrer’s referral delivers results.
- For a referer, they do not need to employ their skills or make use of business structures as they receive commission payments for little effort.
How can you structure the commission payments?
- You can set the payment as a fixed fee for every referral; meaning, each referral generates a certain sum.
- Percentage of the fees. Here you can be entitled to receive a certain percentage of the fees as commission.
- Combination of the fixed fees and percentage.
Does an introduction agreement need to be in writing?
While there is no legal necessity for an introduction agreement to be in writing, commercial solicitors recommend that all parties draw one up as there can be a greater risk of commercial litigation, when one is not drafted.
Key points included
- Details of the manufacturer or end user;
- Details of the payments;
- Details of the product; and
- The commencement date and duration of the agreement.
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