A referral agreement is a written contract in which one person or business (the referral partner) introduces potential customers to another business (the company) in return for a fee. The partner makes the introduction. The company does the selling. The agreement records who gets paid, when, and for which customers, so nobody has to argue about it later from memory.
This guide explains how these agreements work in South Africa, which points cause the most arguments, and where a simple referral arrangement stops being simple. It also shows how our Referral Agreement is set up, so you can see what it covers before you use it.
Key takeaways
- A referral agreement covers introductions only. The partner does not sell, negotiate or sign for you.
- Settle three things in writing: what counts as a referral, how the fee is worked out, and when it is paid.
- Regulated sectors such as financial services need legal advice first, because the law looks at what the partner actually does, not what the contract is called.
- Personal information about the people introduced is covered by POPIA, so consent and handling matter from the first introduction.
- Our Referral Agreement has guided fields, and your first download is on us once you register an account.
Table of Contents
- What a referral agreement does
- Who uses one
- What a referral agreement is not
- The seven points to settle before anyone is introduced
- Where referral arrangements go wrong
- How our Referral Agreement is set up
- Get the agreement
- A simple checklist before you sign
- FAQ
- Sources
What a referral agreement does
Picture a bookkeeper who regularly meets small business owners who need a payroll system. You sell payroll software. She offers to introduce clients, and you offer to thank her with a fee. Without a document, the first sign of trouble is a call that starts with “I sent you that client in March.”
A referral agreement removes that call. According to one South African commercial law firm, it formalises the rules for lead generation: how a lead is registered, when the fee is earned, and how the partnership can be ended. The partner introduces people to you but is not your agent, partner or employee.
People also call it an introducer agreement, a referral fee agreement, a referral partner agreement or a commission agreement. The names differ. The core idea is the same: introduce, then get paid if the introduction turns into a sale.
Who uses one
Referral agreements suit businesses that grow through other people’s recommendations:
- Service providers such as accountants, designers, consultants and installers who pass work to each other.
- Product businesses that pay a thank-you to resellers, influencers or other business owners who bring in buyers.
- Start-ups that rely on a few well-connected people to open doors.
If the person you want to pay will actually sell your products on your behalf, hold stock or set prices, you may be looking at a different arrangement. Our guide to a distribution agreement in South Africa explains that route.
What a referral agreement is not
The distinction matters, because it shapes the rest of the contract.
- Not employment. The partner works for themselves, sets their own hours and is paid per result, not a salary.
- Not agency. The partner has no authority to bind your business, sign contracts or offer discounts in your name.
- Not exclusive. The partner can refer people to other businesses, and you can work with other partners.
These points should be written down plainly. If a partner starts quoting prices or promising terms on your behalf, you have moved beyond a referral, and the paperwork no longer describes what is happening.
The seven points to settle before anyone is introduced
1. Who the parties are
Name the company and the referral partner properly: registered name and registration number for a company, full name and ID details for an individual. Vague names make payment and enforcement harder.
2. What counts as a referred client
This is where most disputes start. Decide which clients count as referred. A sensible test is that the client was introduced by the partner on or after the start date of the agreement. A customer you already had, or one who came to you without the partner’s help, should not trigger a fee.
Practitioners also recommend a time-stamped form or portal for registering leads, so that the first partner to register a lead gets the credit and nobody relies on verbal claims. Even a simple email to you with the client’s details and the date works better than a phone call.
3. Proof of the introduction
The person asking for the fee should be able to show they made the introduction. That could be an email, a message, a form submission or a meeting note. Write down what is acceptable.
4. How the fee is calculated
There are two common models, and you should choose one:
| Model | How it works | Where it fits |
|---|---|---|
| Fixed amount | A set rand amount for each referred client | Low-cost, repeatable sales, or when you want predictable costs |
| Percentage | A share of the price the client actually pays | Higher-value sales that vary in size |
Notice the words “actually pays” in the second model. A percentage of a quoted price and a percentage of the money received are very different things when a client negotiates a discount.
As for how much to charge or pay, there is no standard rate. It depends on your margin, the sales effort the partner saves you, and what your industry normally pays. Work it out from your own numbers first.
5. When the fee is paid
The safest position for the company is to pay the partner only as and when the company itself is paid by the client. If an order is cancelled or never delivered, no fee is due. Say this in the contract, and say it before the first referral, not after the first cancelled order.
6. Confidentiality and personal information
A referral means passing someone’s details from one business to another. That brings in the Protection of Personal Information Act (POPIA). Legal commentary on referral partner agreements notes that you need to be sure the partner has lawful consent from the lead before sharing their information with you, and that you cannot simply use a partner’s customer list for your own marketing. Both sides also need to keep business information private. If you handle personal information through a website too, see our POPIA privacy policy template page.
7. What happens if someone breaks the agreement
Decide in advance how a problem is raised, how long the other side has to fix it, and where a serious disagreement is settled. Agreeing this when you are on good terms is far easier than doing it in the middle of a dispute.
Where referral arrangements go wrong
Calling something a referral when it is not
South African regulators and courts look at what actually happens, not the heading on the document. This is especially true in financial services. In a recent matter reported by Deneys Reitz, an agreement described a lead provider as acting only as a marketing agent and lead referrer, and the judgment still looked past that label. Cliffe Dekker Hofmeyr has also warned that a recent High Court judgment created uncertainty for insurers, brokers and lead-generation businesses that depend on referral-based distribution.
The practical lesson: if your partner will guide, steer or help people to buy a financial product, or you work in any other regulated field, speak to an attorney before you sign anything. A template is not the right tool for that situation.
Rewarding individual consumers for recruiting friends
If your referral scheme invites ordinary consumers to introduce friends in exchange for rewards, the Consumer Protection Act applies. Section 38 deals with referral selling and restricts inducing a consumer to buy on the promise of a rebate or commission for referring other consumers. A business-to-business referral arrangement is a different thing, but check which side of the line your scheme sits on.
Letting the partner speak for you
If the agreement says the partner has no authority to bind you, then do not let them quote, discount or promise. Keep their role to the introduction.
Relying on a handshake
A verbal deal can be binding, but proving its terms is hard. Most referral disputes come down to three questions: was this client really introduced by the partner, how much is owed, and has the company been paid yet. A written agreement answers all three.
How our Referral Agreement is set up
Our Referral Agreement is a South African law document between a Company and a Referral Partner who introduces Clients. Here is what it contains, in plain terms:
- A non-exclusive arrangement. Neither side is locked in. The partner is not an employee or agent and has no authority to bind the Company.
- A clear meaning of “Client”. A Client is someone introduced on or after the Commencement Date. Customers the Company gets without the partner’s introduction are not covered.
- Your choice of fee. You pick either a fixed rand amount per referral or a percentage of the selling price actually paid by the Client.
- Proof of introduction. The Referral Partner must prove they made the introduction.
- Payment when the Company is paid. Fees are due only as and when the Company receives payment. Nothing is payable for cancelled or unfulfilled orders.
- Mutual warranties and a partner indemnity.
- Confidentiality and POPIA duties.
- A 10-Business-Day period to remedy a breach, and arbitration through AFSA.
The document uses guided fields, so you fill in the names, amounts and details step by step without having to decode legal wording. Contracts4Biz templates are created by experienced commercial attorneys with over 20 years drafting and enforcing agreements under South African law.
A few honest limits. The template is a starting point, and you should tailor it to your own arrangement. It has not been checked against your particular facts. We cannot promise that a referral partner will pay, that you will be compliant in your industry, or that any clause will be enforced in a specific dispute. For high-value, regulated, cross-border or already disputed referrals, get legal advice.
Get the agreement
The Referral Agreement costs R295 as a one-off purchase. Register an account at the Contracts4Biz app and your first download is on us. That offer applies to your first download once you have registered an account, and it does not mean every template is free.
You can also go to the Referral Agreement page directly, or browse the shop, though not every product is listed there. If you expect to need several documents, the Start-Up Plan is R99 per month and the SME Plan is R249 per month, with details on our home page. For more on our range, see contract templates for small business.
A simple checklist before you sign
- Write down who is introducing, and who is selling.
- Decide whether the fee is a fixed rand amount or a percentage of what the client actually pays.
- Agree how an introduction is proved and recorded.
- Confirm that the partner has permission to share the person’s details.
- Say clearly that the partner cannot sign, quote or discount for you.
- Check whether your industry is regulated. If it is, see an attorney first.
- Keep a signed copy, and keep a record of each introduction as it happens.
If you are also thinking about how a contract can end, our page on a cancellation of contract clause covers that topic in general. For a deeper look at referral arrangements, read our referral agreement guide.
FAQ
What is a referral agreement?
It is a contract where one party introduces potential customers to another party in exchange for an agreed fee. It sets out what counts as a referral, how the fee is worked out and when it is paid. The partner makes introductions only and does not act as your agent or employee.
How much should you charge for a referral fee?
There is no fixed rate in South Africa. Many businesses choose either a set rand amount per client or a percentage of the price the client pays. Base the figure on your margin and on how much sales effort the partner saves you, then write it into the agreement.
Is a referral agreement legally binding in South Africa?
A properly agreed written contract between two parties can be binding, but we cannot promise how a court would treat any particular document. Courts and regulators look at what the arrangement really is, not only its name. If you work in a regulated field such as financial services, speak to an attorney.
Does a referral partner need to be paid even if the client does not pay?
Only if your agreement says so. Many companies agree to pay the partner only when the client has paid the company. Whatever you choose, state it in writing before the first referral.
Sources
- Referral Partner Agreement in South Africa, MJ Kotze Inc
- Consumer Protection Act, section 38: Referral selling, Acts Online
- Is your lead-generation model about to become illegal?, Cliffe Dekker Hofmeyr
- Marketing financial products is not lead referral, Deneys Reitz
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This article is for educational and informational purposes only. It is not a substitute for professional legal advice. For advice on your specific circumstances, consult a suitably qualified legal professional.
