What should a referral agreement include?
A referral agreement needs six things settled in writing: who the parties are, what counts as a qualified referral, the fee and when it is paid, how long the arrangement runs and what happens to referrals in flight when it ends, confidentiality, and the legal relationship. The skeleton below covers each, with notes on why.
- Define "qualified referral" so precisely that a stranger could referee a dispute with a checklist.
- Pay on revenue received, not contract value — it follows the money and survives refunds.
- Say what happens to referrals in flight at termination; the good precedent is that accepted referrals stay payable.
- Real estate, legal and healthcare referrals are statutory territory — RESPA alone carries treble damages. Template accordingly, then get counsel.
- A paid referrer recommending you to consumers has an FTC disclosure duty; put it in the agreement.
What is a referral agreement — and what is it not?
A referral agreement pays a named person or business for introducing clients they already know. It is not an affiliate agreement, which pays for traffic from strangers via tracked links, and not quite a finder's fee agreement, which usually covers sourcing a one-off transaction. Template sites treat the three as synonyms; the obligations differ.
The distinction matters at the clause level. An affiliate deal needs tracking and content rules; a referral deal needs a tight definition of a qualified referral and a lead-acceptance step, because the referrals arrive by introduction, not by link. Sign the wrong template and you end up arguing about obligations neither side ever intended.
One honest disclaimer before the skeleton: this page is a working starting point written by a software company, not legal advice. For anything with real money attached — and especially anything in the regulated industries covered below — have a lawyer read the final draft.
Which clause causes the most disputes?
The definition of a qualified referral. Almost every referral-fee dispute reduces to whether a particular introduction counted: was the lead genuinely new, did the referrer actually cause the introduction, and did the deal that closed match the referral. Write this clause first and make every term in it checkable.
- New to the business — not already in the CRM, not in an active sales conversation
- Actually introduced — named in writing by the referrer before first contact, not claimed afterwards
- Accepted — the business confirms or declines each referral within a stated number of days
- Converted — the referred party signs and pays; a referral that never closes earns nothing unless you agree otherwise
A referral agreement skeleton you can adapt
The clauses below are drafted for a recurring business-referral arrangement — a consultant or agency introducing clients to a company — and assume a percentage fee on closed business. Replace the bracketed terms, delete what does not apply, and have the result reviewed before anyone signs it.
This Referral Agreement is made between [Company name] ("Company") and [Referrer name] ("Referrer") on [date]. The Referrer agrees to introduce prospective customers to the Company, and the Company agrees to pay the Referrer for introductions that become paying customers, on the terms below.
A "Qualified Referral" is a person or business that (a) is not already a customer of the Company and has not been in active sales discussions with the Company in the [90] days before the introduction; (b) is identified to the Company in writing by the Referrer before the Company's first contact with them; and (c) is accepted by the Company in writing within [5] business days of being identified. The Company may decline any referral at its discretion. A declined referral earns no fee.
For each Qualified Referral that enters a paid contract with the Company within [6] months of introduction, the Company will pay the Referrer [X]% of the fees actually received from that customer during the first [12] months of the contract. Fees are paid within [30] days of the end of each calendar quarter, against amounts actually received. Refunded or charged-back amounts are excluded, and any fee already paid on them may be offset against future payments.
Either party may end this Agreement with [14] days' written notice. Termination does not affect referrals already accepted: fees remain payable on Qualified Referrals accepted before the termination date, on the terms above, for the full payment period.
Each party will keep the other's non-public information confidential and use it only for this Agreement. The Company will not knowingly bypass the Referrer to avoid a fee on a referral the Referrer properly identified. The Referrer will not represent themselves as an agent or employee of the Company, make commitments on its behalf, or describe the Company's products beyond materials the Company has provided.
The Referrer is an independent contractor. Nothing here creates employment, agency or partnership. Where the Referrer recommends the Company to any person, the Referrer will disclose that they are compensated for referrals, as required by applicable endorsement rules. This Agreement is governed by the laws of [state/country], and any dispute will be resolved in [venue]. It is the entire agreement between the parties and may only be amended in writing.
How much should the referral fee be?
Published B2B software arrangements cluster around ten to twenty percent of first-year revenue. Xactly's public referral partner agreement pays 10% of subscription revenue for the first twelve months; HubSpot pays solutions partners 20% for three years on referred deals. Flat per-deal fees suit one-off, high-ticket introductions better than subscriptions.
The percentage matters less than what it is a percentage of. "10% of revenue received in the first 12 months, paid quarterly, net of refunds" and "10% of contract value, paid on signature" can differ enormously on the same deal — the first follows the money, the second front-loads risk onto the payer. Pick the first unless you have a reason not to.
When is paying a referral fee illegal?
In several regulated industries, a referral fee that is routine elsewhere is a statutory offence. Real-estate settlement services, legal work and healthcare all restrict or ban paying for referrals, and consumer-facing programs carry disclosure duties. If a deal touches any of these, the agreement needs a lawyer, not a template.
- US real estate settlement: RESPA §8 bans any "fee, kickback, or thing of value" for referrals involving federally related mortgage loans — with fines, imprisonment up to a year, and civil liability of three times the charge
- Lawyers: professional conduct rules (ABA Model Rule 7.2 pattern) bar compensating someone for recommending a lawyer's services outside narrow exceptions
- Healthcare: anti-kickback rules make paying for patient referrals a criminal matter in most jurisdictions
- Consumer recommendations: FTC rules (16 CFR §255.5) require a paid endorser's material connection to be disclosed clearly and conspicuously
Do you actually need a lawyer for this?
For a low-value arrangement between two businesses in an unregulated industry, a well-adapted template plus a careful read is a defensible risk. Involve a lawyer when the fees are material, the industry is regulated, the referrals cross borders, or the counterparty sent you their template — especially then.
Is a referral agreement legally binding?
Yes, once both parties sign it — which is exactly why the qualified-referral definition and the payment basis deserve more attention than the boilerplate. The clauses people skim are the ones that decide disputes.
What is a typical referral fee percentage?
Published software arrangements sit around 10–20% of first-year revenue — Xactly publishes 10% for twelve months, HubSpot pays solutions partners 20% for three years. One-off high-ticket introductions are more often a flat fee per closed deal.
Are referral fees legal?
Between ordinary businesses, generally yes. In US real-estate settlement services (RESPA §8), legal services and healthcare they are restricted or banned outright, and consumer-facing paid recommendations must be disclosed under FTC rules. Regulated industry means lawyer, not template.
What is the difference between a referral agreement and a finder's fee agreement?
Usage overlaps, but a finder's fee agreement typically covers sourcing a specific one-off transaction — an acquisition, a property, an investor — while a referral agreement covers an ongoing flow of client introductions. The payment trigger and duration clauses differ accordingly.
- 12 U.S.C. §2607 (Cornell LII) — RESPA §8 — "No person shall give and no person shall accept any fee, kickback, or thing of value" for settlement-service referrals; penalties include treble damages
- US Consumer Financial Protection Bureau — RESPA Section 8 FAQs — scope of the referral-fee prohibition and its implementing Regulation X
- 16 CFR §255.5 (Cornell LII) — Disclosure of material connections between endorsers and sellers
- 204 Pa. Code Rule 7.2 (Cornell LII) — Restrictions on compensating others for recommending a lawyer's services — the Rule 7.2 pattern
- Xactly referral partner agreement — A live example of published referral terms: 10% of subscription revenue for the first 12 months, paid within 30 days, accepted referrals honoured after termination
Last reviewed 21 August 2026.
Put this into practice
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