Terms And Conditions to Include in Your Affiliate Agreement

Over the past decade, affiliate marketing has taken the advertising world by storm, shaping most digital marketplaces and becoming one of the most popular marketing strategies.

Affiliate marketing is the process by which companies outsource their sales and marketing, relying on affiliates that earn a commission to advertise their products.

These affiliates choose to promote products of their choosing, usually going for items or services they truly enjoy. They then earn a piece of the profit made from each sale they secure.

As a result, affiliate marketers are essentially ‘prosumers,’ i.e., consumers turned providers.

The term ‘prosumer’ was coined by technology expert and futurist Alvin Toffer in the 1980s. Despite being four decades old, the idea of prosumers (now known as affiliate marketers) is as relevant as ever.

It’s important to point out that in our current digital marketplace, which is dominated by social media marketing, influencers have become popular affiliate marketers in most industries, representing brands and companies across popular platforms like Instagram, Twitch, and YouTube.

Why You Need Affiliate Agreements (or Terms and Conditions) 

The evolution of marketing strategies has brought a series of challenges around the legal and moral implications of selling products online.

Nowadays, terms and conditions are everywhere, from online shopping sites to subscription-based services, social media, and entertainment platforms.

These legally binding agreements are necessary to help businesses establish a legal bond between brands and their users (in this case, affiliates).

These agreements help to define the terms of the partnership between both parties and for affiliate marketing includes

• Definitions of terms
• Tracking and measurement
• Commission rates
• Sales validations and payment schedules
• Enrolment and affiliate restrictions
• Compliance
• Intellectual property rights
• Promoting competitors
• Confidentiality clause
• Term of agreement and termination
• Disputes
• Indemnification

An agreement makes each party’s obligations and legal responsibilities clear to both parties. Additionally, it can help to protect intellectual property and provide a framework for resolving any disputes between both parties.

Did you know that with Tapfiliate, you can add your affiliate terms and conditions easily to avoid misunderstandings.

While most affiliates are ethical business partners looking to add value to companies, unethical or illegal practices do happen.

Affiliate marketing misconduct can seriously hurt a company’s brand image. 

What Do You Need to Include in Your Affiliate Agreement?

We have compiled some ‘must-have’ clauses that any serious and robust terms and conditions affiliate agreement should include.

Definitions of Terms

It’s essential to spell out the terms in your affiliate agreement so it’s clear who you are talking about. You need to clearly explain key terms used through your agreement like “affiliate,” “merchant,” “commission” so that the agreement is easily understood.

Tracking and Measurement

It’s a good idea to inform your affiliates exactly how you are tracking sales to avoid any confusion.

Include the cookie type, whether you are deduplicating against other networks or channels, and how you are attributing sales (last click is most common with affiliate marketing) so that the affiliate understands exactly where you are coming from.

Commission Rates

Every affiliate agreement needs to have the commission rates included because it gives the affiliate transparency on what they will be earning and will encourage them to promote you. Without seeing a commission rate upfront an affiliate might be less inclined to promote you to their audience.

This can include product-specific commission rates, category commission rates, tiered commissions (based on sale value or amount), commission by affiliate type, or any other commission structure.

Sales Validations and Payment schedules

You need to make it clear to your affiliates how often you will validate (or approve) your affiliate sales and let them know that any sales returns will be rejected. If you have a 30-day return policy you would do sales validations every 30 days, and then once this is done, how soon after a sale is approved you will pay the affiliate commission.

By including payment schedules into your affiliate agreement you will give clarity on when your affiliates will be paid and how often so that both you and the affiliate can plan financials. This can help you as a brand to manage expectations with your affiliate and create trust.

Enrolment and Affiliate Restrictions

It is prudent to include the process for an affiliate to apply and be accepted into the affiliate program, including any essential criteria. This section will outline what is expected from the affiliate in terms of how they promote the product and use trademarks, and any activities you want to prohibit.

For example, if you have an affiliate program, you might have an idea of what type of affiliate you want to work with. Many affiliate programs include restrictions on promotional methods, and the most common are coupon sites and paid search, but can also include adult sites and other niches. 

Coupons

Coupons and discounts tend to work better in highly competitive digital markets where companies sell items such as beauty products or clothing. Additionally, e-commerce businesses offering services for business can take advantage since that industry is very crowded at the moment.

To make the most out of your coupon affiliate marketing strategies, it’s important to choose a selected group of high-quality affiliates to work with. Accepting coupon affiliates or not is an important choice, but either way, it’s essential to make it clear in your affiliate program agreement.

PPC

There are plenty of ways affiliates can promote your products and services. But you’ll want to ensure their promotions fit within your overall marketing strategy and don’t have a negative impact on other channels. In other words, you don’t want to be in competition with your own affiliates.

This occurs most commonly in paid advertising, wherein affiliates run paid ad campaigns on Google Ads, Facebook, or elsewhere using their own referral link.

While this could bring in leads, it comes at a cost. Affiliates will be in direct competition with you to reach potential customers, and this drives up the CPC (cost per click) costs. Alongside that, you won’t be reaching new audiences like you would through a blog or word-of-mouth. Instead, the affiliate would be advertising to the same audience that your business is already reaching.

You could prohibit any promotions through paid ad channels or limit paid ads such as no bidding against branded keywords.

Outlines what is expected of the affiliate, such as how they can promote the products, use of trademarks, adherence to specific marketing practices, and any prohibited activities.

Compliance 

Having legally sound affiliates is essential. Any serious affiliate contract must specify rules that follow government regulations in your country, especially those regarding FTC (Federal Trade Commission) compliance. 

To be FTC compliant, the agreement must state that your affiliates receive compensation and that such promotion is carried out with transparency.

For example, if an affiliate is trying to promote a product by saying “this is the best sunscreen for sensitive skin,” they must state that the content includes affiliate links.

If not, that statement would be dishonest and subsequently break FTC regulations. In those cases, the brand is held accountable for such practices, not the affiliate.

Intellectual Property Rights

Additionally, it’s important to protect your company from intellectual property claims. To do so, the agreement should include a clause regarding copyrights, patents, trademarks, or any kind of private and sensitive information the affiliate is not allowed to use.

In this same vein, it’s important to ensure that your affiliates respect copyrighted content when promoting your products or services. If an affiliate were to break copyright rules, the legal repercussions could end up affecting your company.

This rule applies to any corporation, no matter how big or small. Big brands like Apple, Microsoft, and Samsung have been suing each other due to copyright-related claims for over a decade now.

Confidentiality Clause

A confidentiality clause is a vital piece of your affiliate agreement because it requires both you and your affiliate to keep confidential any proprietary information shared during the term of the agreement. This can protect you 

Liability and Indemnification: Addresses liability issues, including any warranties and indemnification by the affiliate for claims arising from their promotional activities.

Term of Agreement and Agreement Termination

Within your terms and conditions it’s a good idea to include the terms for termination. Usually brands do not require affiliates to give them notice if they are terminating the agreement, and for brands it;s essential to have a clause that says you can terminate the agreement at any time for any reason. 

However, for your internal processes it is common to give an affiliate a warning. If they are breaching your terms of agreement (like running PPC), usually as a brand you would give the affiliate time to rectify the situation and keep a close eye on them. For anyone breaking the terms of agreement in a serious way like promoting your brand on an adult website, you can remove them immediately.

Disputes

In your affiliate agreement include information on the process for disputes and how they will be handled. You should outline the process step by step so that it is clear and easy for affiliates to follow.

It might start with direct communication, and if that can’t be resolved mediation. As a brand, you want to try to avoid legal action as much as possible but it could happen. It is essential that you include the jurisdiction or legal system that will govern the dispute so that you are covered if an affiliate does decide to pursue legal action.

Indemnification

Indemnification is like a safety net in agreements that protects one party if they suffer losses or damages because of the other party’s actions.
Indemnification is particularly important in an affiliate agreement for several reasons:

1. Protects Against Third-Party Claims: Affiliates often engage in various promotional activities to drive traffic and sales. If an affiliate’s actions inadvertently infringe on third-party rights (for example, copyright infringement, false advertising), the merchant could be held liable. Indemnification ensures that the affiliate will be responsible for the legal costs and damages arising from their actions.
2. Risk Management: It helps manage risks for both parties. By clearly outlining indemnification terms, both the merchant and the affiliate understand their liability exposure and can take steps to mitigate risks, such as adhering to advertising guidelines and respecting intellectual property rights.
3. Maintains Brand Integrity: Merchants want to protect their brand reputation. If an affiliate uses deceptive practices or makes unsubstantiated claims about the merchant’s products, it could harm the merchant’s brand. Indemnification clauses ensure that the affiliate bears the responsibility for their promotional tactics, encouraging more responsible marketing.
4. Regulatory Compliance: Both affiliates and merchants must navigate various laws and regulations related to advertising, consumer protection, and data privacy. Indemnification provides a safeguard against potential legal issues arising from non-compliance by either party, particularly in jurisdictions with stringent regulatory environments.
5. Financial Security: It offers financial security by ensuring that any potential losses, fines, or legal fees resulting from the affiliate’s actions do not unduly burden the merchant. This is crucial for merchants, especially smaller businesses, where such unexpected costs could be financially damaging.

Keeping the Agreement Up to Date

All terms and conditions agreements should include an update clause that offers both parties the opportunity to renegotiate previous contractual clauses. Additionally, it’s important to communicate all changes to the agreement with your affiliate partners.

Usually, it’s recommended to review agreements annually, and communicate any changes at least 30 days before the change takes effect.

Key Takeaways

Making sure that you have a solid affiliate agreement in place is an essential step for your affiliate program in order to provide transparency and clarity for your affiliates.

There are several critical aspects your affiliate agreement needs to cover including commission rates, payment schedules, enrolment and more to set you up for success.

If you include everything outlined above you will be covered for almost every eventuality.