All About Lead Generation Agreements
Lead generation agreements are contracts between businesses or service providers and parties (individual leads, their employers, or business entities) who wish to sell either standalone or service-related products through the creation of leads. These generally specify that the lead generator will be paid commissions on sales of products sold or service contracts that are executed as the result of leads they generated. Virtually all lead generation agreements will have a section that sets forth the consideration terms (how much is paid to the lead party if a contract is executed). Lead generation agreements may also be referred to as lead purchase agreements, lead buying agreements, marketing/purchase agreements, or referral agreements.
When two or more parties agree to work together in the creation of new sales leads for specific products or services, they will create lead generation contracts that will outline in detail each party’s rights and obligations regarding the promotion, development, marketing, and sales related to certain products or services . A lead or lead generation is a prospective consumer or business that has expressed an interest in your company’s products or services in some way. Lead generation can involve a range of tactics, from simple email blasts to the marketing of legal services, to complex information technology systems that track prospective buyers of products and services. Third-party lead generation is a business model that involves the selling of leads. In other words, rather than selling products or services directly, companies will gather contact information from people with a potential future interest in a product or service (for example, signing up for a newsletter or request for information) and develop a database of this consumer contact information, which is then sold to companies or individuals looking for prospective leads for sales and marketing purposes.
Lead Generation Agreement: What to Include in the Template
A lead generation agreement template must include the scope of services. The scope of services addresses the services being requested and the lead generation company’s responsibilities in providing the services. All lead generation services typically include the lead generation company’s obligation to generate leads and deliver them to the client. The scope of services can be for one-time lead generation services, periodic lead generation services such as weekly or monthly lead generation services, or ongoing lead generation services. Payment terms are another component of a lead generation agreement template. Payment terms should address how the client is supposed to pay the lead generation company, when and how the lead generation company is going to invoice the client, and the payment schedule. Payment terms can be the client agrees to pay on a monthly basis or the client agrees to make the payment when it receives its periodic invoice. A confidentiality clause addresses how the parties are going to keep the information confidential under the lead generation agreement template. A confidentiality clause is particularly important because the client’s privacy, including the client’s intellectual property, is the most valuable asset of the client that must be protected by the lead generation company. Confidentiality clauses can be broad by addressing all types of information in general or narrow by specifically identifying what information must be kept confidential. In addition, the confidentiality clause can include effectively a confidentiality time period or a time period that addresses how long the lead generation company has to keep the information confidential. Termination provisions: A lead generation agreement template should include termination provisions that address when the client can terminate the lead generation agreement. A client needs to be able to terminate the lead generation agreement if the client feels unsatisfied; the lead generation company is not working out; the lead generation company has breached certain areas of the lead generation with the client; or there is bad blood among members of the parties.
The Benefits of Using an Agreement Template
The use of an agreement template is one of the benefits of taking care of business on a lead generation. Many of the contracts that are frequently used in business are ones that deal with hiring and working with independent contractors. Using an agreement template is as simple as filling in the blanks for your business information, and then you have a customized agreement for your needs. The first benefit to this is that you are protected legally. The explicit nature of the terms of your agreement allows you to be covered in the case of any misunderstandings. An independent contractor could easily decide that they did not like the terms of a lead generation agreement after they completed the work, and they could try to have the deal nullified if you do not have an agreement already written providing for your legal protection. You have the same protections if you decide that there was a lack of performance from the independent contractor. You can terminate the agreement, and that termination can be backed up with legal strength. The second benefit that a lead generation agreement template provides is an easy way to clarify business relationships. Before work is even begun, both parties will have the appropriate expectations set before them. Any ambiguity in the terms of the work agreement can be easily identified and dealt with by either party. This means that there are no financial surprises when the project is finished. Finally, both parties can save time by having a lead generation agreement template. When work is done, and there is no contract in place, the terms of agreement can be open to question. This will take extra time for both people to figure out, and it can delay the process of work. The relationship can still work out in the end, but it won’t be as convenient for both parties. There is a good chance that using the lead generation agreement will save both people time and money in the process.
Common Traps to Avoid
One of the most common mistakes is for a lead generation agreement to give away all rights in the leads generated by the agent regardless of whether the client is the one forwarding leads. Often this occurs due to a lack of attention to detail in either the contract or the invoice process if the process is automated.
It is important to remember that in most cases, the lead generation agent will not personally know the person who is ultimately going to review the form and make the "sole discretion" determination as to whether the lead was submitted. This means that certain leads – purchase requests, financial aid, insurance request, others – could be treated differently than other leads.
For example, a "qualified lead" for a mortgage lead generation system might be a recently engaged young couple looking for starter homes in a certain zip code who just started looking last week. If the lead is simply a chance shot of someone requesting a loan form, such a request would not truly be qualified. Other sites using Google Ads, however, may be collecting simply those visitors who see an advertisement and then click on the link to fill out a request for a loan.
As should be clear from the discussion above, the definition of a qualified lead serves two purposes: to determine what happens if the lead generation agent provides leads that are not really qualified and to determine the hours of labour the lead generation agent is required to provide. The latter could be relevant in a situation where the lead generation service is tied to the amount of time that is spent working on a lead.
Many lead generation agreements have a number of standard or boilerplate provisions. Depending on the industry, this can be appropriate. The fact is that long after your contract is signed, you are going to need to refer to it to understand your obligations under the terms of the contract. If you need to know when taxes will be paid, or how the provision relating to insolvency is to be measured, you may be forced to pay your lawyer time to find, and advise you about, how the boilerplate will be interpreted. This is time wasted on something that is supposed to be simple.
In many cases, there will be a return on the lead generation service, but in others, there may be no refunds available. The lead generation service should determine whether a refund on a lead is available, and under what conditions, if at all. In some cases, refusing to issue a refund can be a deal breaker, but having it available and described in simple terms can go a long way to avoiding ambiguity later.
Both lead generation agreements and referral agreements are essentially contracts that govern the transfer of a potential business opportunity from one business to another. There is no reason why there should be a need to reinvent the wheel when it comes to drafting or editing either type of document. This means that both parties should have access to a lead generation agreement template to begin the drafting of a contract.
In most cases, a referral agent will want an exclusive right to refer clients with a particular issue to the client business. In legal terms, this is called an agency relationship. Its legal definition can be found here. It may seem tempting to define a referral agent as simply a third party that can be paid a bonus for referring clients, but this does not properly account for the reality of the relationship under the lead generation service. Sometimes the answer is as simple as giving the referral agent a bonus, but it can be more complicated than that.
Using Your Own Template for Your Lead Generation Agreement
While it’s tempting to search for a pre-drafted lead generation agreement template, we don’t recommend going that route. Even if you find a site that offers an agreement template for free, it’s likely to be riddled with errors in both substance and technique. Instead, shop around for a formal template with language that is sound and language that makes sense in conformance with the industry you operate in.
Once you have a generic agreement that is clean, you’ll likely need to tailor it for your organization, the services you provide and the jurisdictions in which you operate. If, after having shopped around for agreement templates, you still don’t see one that fits your situation, give consideration to satisfactory – albeit perhaps more expensive – alternatives: hire a professional to craft a new agreement or use the two coexistently to draft a new lead-generation agreement. Meaning: If you’re going to roll up your sleeves and create your very own lead generation agreement , there are a few key things to keep in mind before you get started. First, make sure you understand the nature of the parties involved in the agreement (e.g., are you seeking leads for purchases of real estate, power of attorneys, mortgages, contracts, medical devices, software solutions, brokers, traders, financial services, etc.?) We also advise that you list out the terms of your relationship, how you intend to market to people/consumers/buyers of goods and services, what makes your service unique, how you intend to monetize the agreement and how you’ll keep track of what comes in and goes out between the parties. Finally, as always, beware of words or phrases that have special meanings. Everyone needs to be on the same page when it comes to terms and conditions used in a lead generation agreement.
Significant Concerns About Your Lead Generation Agreement Template
Lead generation agreements carry a host of legal implications that businesses must comply with to avoid steep penalties or costly litigation. At the outset, any entity collecting and storing consumer data must do so in compliance with the Fair Trade Commission (FTC) and, for businesses operating cross-border sales, the GDPR.
The FTC enforces against unfair or deceptive acts and practices, including deceptive endorsement or testimonial ads, deceptive ads to children, and deceptive lead generation publications. In most instances, the FTC will seek injunctive relief and an award of damages. However, under the Preventing Online Sales of Illegal Goods and Services Act, the FTC can also impose civil penalties. Civil penalties range from $5,000 to $40,000 per violation, depending on the severity of the violation. The FTC also can charge attorney and witness fees, costs of investigation, and monitoring expenses in addition to an award of damages.
The General Data Protection Regulation and the California Consumer Privacy Act are two recent laws that impose strict compliance mandates on businesses that collect, store, and use personal data. The GDPR specifically requires state consent for businesses to collect, use, and store personal data. Such consent must be clear and affirmative. The GDPR also requires parents’ consent for any child under 16 years-old. Violations can lead to administrative fines up to 20 million Euros or 4% of a processor’s worldwide annual revenue, whichever is higher.
In the United States, personal data is protected under the California Consumer Privacy Act 2018 (CCPA). The CCPA guarantees California residents the right to know what categories and specific personal information companies are collecting, the right to have this information deleted, and the right to opt-out of the sale of that information. Businesses violating the CCPA can be fined up to $7,500 for intentional violations and $2,500 for unintentional violations.
Independent of these statutory potential damages, lead generation agreements can leave a business vulnerable to tort liability if the lead is misleading or misrepresentative. Depending on the circumstances, a plaintiff may bring a fraud, tortious interference, or breach of contract action against an entity generating bad leads. Fraud is premised on misrepresentation or deceit actually causing harm. To prove this type of fraud, a plaintiff must exhibit "(1) a material misrepresentation of an ascertainable fact, (2) knowledge or belief by defendant that the representation was false when made, (3) intent, by defendant, to induce plaintiff to act in reliance upon the misrepresentation, (4) justifiable reliance by plaintiff upon the misrepresentation, and (5) damage to plaintiff as a result of that reliance." T.V. v. New York Coll., 25 Misc 3d 1211(A), 885 N.Y.S.2d 835 (Sup. Ct. 2009). Finally, the tort of tortious interference occurs where a contract exists, a third party knows of the contract, and does something to interfere with the contract.
Because lead generation is still an evolving industry, and not every contract will fit into the template, businesses considering lead generation agreements should seek the advice of an attorney.
Find the Right Template for Your Business
When it comes to choosing the right lead generation agreement template for your organization, there are several factors to consider. First, consider the industry in which you operate. Certain regulated sectors, such as health care or financial services, have specific rules and guidelines relating to marketing and sales activity that you need to ensure the agreement complies with.
Next, look to the size and scale of your organization. A lead generation agreement for a small start-up may need to be more focused on relationship building and brand awareness, while a larger enterprise may be more focused on hard metrics and analytics to ensure accountability and high productivity from its marketing efforts.
Finally, think about any regulatory obligations you may have as a company or as an industry. For example, is your company a member of the Better Business Bureau? As an accredited member, you may be expected to meet certain standards that your lead generation partners should adhere to as well.
As you consider these factors, be sure to include the appropriate personnel within your organization in the decision process. That may include your marketing and sales teams, human resources and legal counsel, among others. Having input from everyone affected by the agreement makes for a more robust final product that is less likely to require renegotiation or amendment later on.
Frequently Asked Questions
1. What are lead generation agreements?
Lead generation agreements are contracts that define the relationship between a lead generation business and an operator that sells products or services to consumers. These agreements can be either exclusive, in which the lead generation business primarily generates leads for a single operator, or non-exclusive, in which the lead generation business engages with multiple operators.
2. Is a lead generation business a franchise?
No, there is no requirement that a lead generation business sell franchises. However, lead generation businesses are defined as "franchisors" for purposes of tax liability under Franchise Tax Board v. Mattson (2006) 39 Cal.4th 87, 99, which held that the lead generation business in that case was not exempt from franchise taxes because it qualifies as a "franchisor" (Cal. Rev. & Tax Code, ยง 22981 subd.(d)) under the Franchises Investment Law. California’s Franchise Tax Board appears to apply the 20 Automatic Leads Test, which automatically deems the arrangement to be a franchise unless certain conditions are satisfied to demonstrate it is not a franchise by virtue of the "right to do business." In those scenarios, there is an argument that the lead generation business is not subject to FTC or Franchise Act requirements .
3. Is a lead generation business a broker?
No, a lead generation business is not a broker. However, there may be a different designation of broker in states where one or more of its activities would constitute the activities of a broker, as outlined in their laws. For example, if an activity constitutes "receiving a fee for a successful real estate referral," a lead generation business would have to be licensed as a real estate broker in California.
4. Do lead generation businesses need licenses?
There are no licensure requirements to operate as a lead generation business in a majority of states. However, lead generation businesses must obtain licenses where lead generation activities constitute broker activity, i.e., fee for a successful real estate referral; fee for insurance referral; paid assistance with obtaining a home mortgage. These types of lead generation sales or activity require licensure.
5. Can you offer more than one lead generation agreement template?
Yes, lead generation agreements can be customized for different types of operators, depending on the services offered by the lead generation business. There are various free templates available online for other industries.