Welcome to Part 2 on “How to write a Referral Service Agreement”. If you missed part 1, you can find it here.

In part two we will look at some of the other terms that you, or your contract lawyer, may wish to include in such an Agreement. These terms include the following:

Avoiding Competition

It is important to remember that a good referral relationship is not a competitive relationship, but one where each business is working to benefit the other. Having said that, there may be certain products and services in which both businesses trade. When this situation arises, it is important to include a term in the Referral Service Agreement that identifies which services and products each party will be referring under the arrangement. The Referral Service Agreement should not, in any way, limit the ability of either party to offer or sell products that do not encroach on the referral relationship.

Complying with the law

Besides ensuring minimum performance standards with all referral partners, you need to also assure yourself and your business that your partners are conducting their business activities lawfully. Make sure any regulatory codes such as the National Credit Code or any of ASIC’s relevant regulatory guides are highlighted in the Referral Service Agreement.

Insurance/ Indemnity

Try to ensure that every referral partner you work with has an up-to-date professional indemnity insurance policy that relates to providing referral products or services. It is also common in a Referral Service Agreement to indemnify your referral partners from any claims relating to the Referral Service Agreement. This might relate to losses, damages, costs, expenses or claims by clients under the Agreement. The indemnity should be broad enough to cover breaches of the Agreement and breaches of the law, and should be reciprocated by the other party.

Confidential information and Privacy

Ideally, your clients should feel comfortable doing business with your referral partners. For clients to feel like they can trust referral partners, both you and them need to be confident that intellectual property or confidential information will not be disclosed or misused in any way. This is a fairly standard clause to include in any agreement, so it should not be a problem negotiating its inclusion.

Termination

Unfortunately, sometimes even the most airtight commercial relationships can turn pear-shaped. Have a termination clause included in your agreement to ensure that you and your referral partner understand the circumstances under which either party may terminate the agreement.

Referral Service Agreements should be in writing

By drafting a Referral Service Agreement in writing, you formally establish the legal boundaries of the arrangement, the performance standards and other commercial expectations of each party, as well as the specific fee arrangement on which the agreement will be based. This means there is no confusion, no misunderstanding, and no excuses for either party to say you they not sure about the terms of the Agreement.

Conclusion

Need assistance drafting a Referral Service Agreement? Would you like an experienced contract lawyer to review the terms of the Agreement? If you are considering working with, or already work with, referral partners, it is worth formalising whatever arrangement you work under in writing, so that your business’ reputation is not damaged by one partners poor performance.

Contact LegalVision on 1300 544 755 and speak with one of our contract lawyers today.

 

 

Lachlan McKnight

Next Steps

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