Document agreement terms for finding new business: Finder's Fee Agreement
What we’ll cover
What is a Finder's Fee Agreement?
A Finder's Fee Agreement outlines the relationship and the compensation to be expected in a relationship where an incentive is being offered in exchange for new leads or clients. Finder's Fee Agreements can also help in the face of future disagreement, preventing any alleged uncertainty.
Sometimes valuable business information, potential clients, and contacts come from an outside source. Documenting your arrangement on a Finder's Fee Agreement - also known as Referral Agreement - helps ensure that the interests of both parties are laid out in certain terms.
Get started on your own Finder's Fee Agreement now with Rocket Lawyer – just answer a few simple questions and we will build the document for you.
When to use a Finder's Fee Agreement:
- You are a business owner and want to compensate someone to help you find prospective investors.
- You want to hire someone to help build your client list.
- You can offer your expertise finding potential investors, clients or other business prospects.
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Sample Finder's Fee Agreement
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FINDER'S FEE AGREEMENT
In consideration of a Finder's Fee (as defined below), payable only upon the successful consummation of the services (hereinafter "Discovery"), ("Finder") of , , agrees to assist ("Client") of , , in the Discovery. For purposes of this agreement ("Agreement"):
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. Discovery.
Finder's "Discovery" of shall occur only if the are identified and introduced by Finder and acknowledged by Client in writing during the Retention Period (as defined below). Finder shall not be deemed to have discovered any who contacted or were contacted by Client on or before the Effective Date (as defined below), or any who hereafter contact or are contacted by Client after the Effective Date before being identified and introduced in writing by Finder to Client (if at all) (collectively, "Independent Contacts"). Client shall attempt to provide Finder with an updated list of Independent Contacts from time to time, but any delay or failure by Client to do so shall not constitute a waiver of or otherwise prejudice any of Client's rights or impose any obligations on Client hereunder.
. Business Transaction.
For purposes of this Agreement, the "Business Transaction" shall be defined as assisting Client in finding on the terms and conditions acceptable to Client. The Client reserves all rights, in its sole and absolute discretion, and without any obligation to pay a Finder's Fee or any other sum to Finder, to withdraw from negotiations concerning any proposed Business Transaction, and/or accept or reject any finding by the Finder, or all or part of any proposed Business Transaction, at any time, with or without cause. As used herein, "consummation" of the Business Transaction shall not be deemed to have occurred unless and until, among other things:
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. Term and Retention Period.
The exclusive The non-exclusive right granted by this Agreement shall commence on ("Effective Date") and the "Retention Period" shall continue for at which point either party may indicate to the other, in writing, its prospective intention to terminate this Agreement. Finder shall be entitled to its Finder's Fee during the Retention Period, or, in the event a Business Transaction is consummated after termination of the Retention Period, and under the terms of this Agreement, within 30 days of the consummation of the Business Transaction.
. Non-Circumvention.
During the term of this Agreement and for thereafter, Client will not attempt to do business with, or otherwise solicit any found or otherwise referred by Finder to Client for the purpose of circumventing, the result of which shall be to prevent the Finder from realizing or recognizing a commission or Finder's Fee. If such circumvention shall occur the Finder shall be entitled to any commissions due pursuant to this Agreement or Finder's Fee relating to such transaction.
. Eligibility.
Finder shall be entitled to the Finder's Fee in the event that during the Retention Period (i) the Business Transaction is consummated or materialized, and (ii) Finder discovered the to assist Client during the Retention Period.
. Date of Payment.
The Finder's Fee shall become due and payable by the Client immediately upon consummation of the Business Transaction. Client shall have no obligation to pay Finder any Finder's Fee or other amount if the Business Transaction in question fails to close for any reason, including without limitation, as a result of an actual or purported breach or default by Client.
. Calculation of Finder's Fee.
For purposes of this Agreement, the Finder's Fee shall be paid in the amount of per Discovery. calculated at % of the Business Transaction consideration. The Finder's Fee shall be calculated on a pro-rata basis against any and all consideration contributed (discovered) by Client and their exclusive subject matter not identified and introduced in writing by Finder. paid as follows:
. Independent Contractor.
It is understood that this Agreement provides for the rendering of services by Finder as a finder only, as described herein, and does not include the rendering of any other services, including due diligence services. Finder acknowledges that it is an independent contractor and shall not be deemed to be Client's agent for any purposes whatsoever. Finder shall have no right or authority to assume or create any obligation or liability, expressed or implied, for or on behalf of Client, or to otherwise bind Client in any manner whatsoever.
. Hold Harmless.
If Finder shall become entitled to a Finder's Fee under this Agreement, Finder hereby agrees to indemnify, protect, defend and hold harmless Client and its affiliates from and against any and all claims, actions, losses, liabilities, damages, liens, costs or expenses (including, without limitation, reasonable attorneys' fees and costs), however described, arising from any claim by any other person or entity for brokerage or finder's fees, commissions, or similar compensation in connection with any Business Transaction involving a Prospective Investor discovered by Finder.
. Sharing of Fees.
The Finder is specifically authorized to engage the services of any sub-agents and to share fees and commissions with other agents, provided that full disclosure of any fee or commission sharing is made to all parties.
. Governing Law.
This Agreement shall be made in and shall be governed by and interpreted in accordance with the laws of the State of Commonwealth of .
. Confidentiality.
Finder agrees to:
| (i) | hold all confidential, non-public information received from Client or its affiliates, or their respective representatives, strictly confidential, |
| (ii) | use or release such information only in the performance of this Agreement, and not use or release or permit the use or release of any of such information for any other purposes, and |
| (iii) | return to Client all such information in whatever format (and all copies thereof) at the conclusion of this engagement. |
. Attorneys' Fees.
If legal action is brought to enforce or interpret this Agreement or any of its provisions, the prevailing party shall be entitled to reasonable attorneys' fees in addition to any other recovery to which such party may be entitled.
. Termination.
This Agreement may be so terminated by either party at any time, with or without cause. This Agreement may be terminated by either party by the giving of written notice of termination to the other. In the event that the Client sends a notice of termination after the Finder has incurred specific, direct expenses in connection with this Agreement, the Client shall reimburse the Finder for the amount of the expenses at the time of the termination.
. Entire Agreement.
This Agreement contains all of the agreements of the Parties with respect to any matter covered or mentioned in this Agreement and no prior agreements shall be effective for any purpose.
. No Waiver.
Failure or delay of Client to declare any breach or default immediately upon occurrence shall not waive such breach or default by the Finder.
. Notices.
Any notices required to be given by the Parties shall be delivered at the addresses set forth in the beginning of the Agreement. Any notices may be delivered personally to the addressee of the notice or may be deposited in the United States mail, postage prepaid, to the address of the parties.
IN WITNESS WHEREOF, this Finder's Fee Agreement by and between , , on behalf of and , , on behalf of has been executed and delivered in the manner prescribed by law as of the date first written above.
CLIENT:
| By: | Date: |
,
FINDER:
| By: | Date: |
,
[PAGE_BREAK]
Final Checklist for Finder's Fee Agreement
Make It Legal
| _____ | Look over the Finder's Fee Agreement to ensure it matches your intentions. If you need to make changes to the Finder's Fee Agreement outside of the interview, you will be able to make changes online or in Word format in the Document Manager at the end of the process. |
| _____ | Use the easy e-signature service to sign electronically without having to print, sign and deliver hard copies. Or, print and sign hard copies of your Agreement. Have both the Parties sign and date the Finder's Fee Agreement in duplicate. |
| _____ | Make sure to attach Exhibit A "Independent Contact" to this Agreement which lists all the current contacts of the Client for which the Finder will not receive a fee. |
| _____ | Deliver a copy of the Finder's Fee Agreement to the other Party. |
Copies
| _____ | Keep a copy of all documents for your own records and in case there is a problem. |
| _____ | Keep an original signed copy of the Finder's Fee Agreement. Your copy should be kept in a safe place. If you signed a paper copy of your document, you can use Rocket Lawyer to store and share it. Safe and secure in your Rocket Lawyer account, you can access it any time from any computer, as well as share it for future reference." |
Members can always consult an attorney at no extra cost!
| * | If you have quick questions or wish to review this document with an attorney, you can do so for free. Rocket Lawyer's On Call® service makes it fast and easy to speak with a local attorney. Get started by visiting the Find a Lawyer tab on our site, or calling (866) 243-2183. |
About Finder's Fee Agreements
Learn about how to document agreement terms for finding new business
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Common terms in a Finder’s Fee Agreement
A Finder's Fee Agreement is used to engage a finder to source potential clients for a business. To achieve this, Finder’s Fee Agreement templates normally cover a wide variety of terms you might not be all too familiar with, such as:
Parties
A Finder's Fee Agreement usually starts by clearly identifying who the agreement is made by or between (finder and client). Individuals who are named, included in, or sign an agreement are often referred to as parties or a party.
Appointment of finder
This provides details of the finder’s appointment, including whether they are appointed on an exclusive or non-exclusive basis. It also briefly covers the situations in which the client will pay the finder.
Obligations of the finder and of the client
This sets out what obligations each party has under this agreement for its duration.
Business transaction
A business transaction eligible for a finder's fee is considered to have occurred only after certain specific conditions stated in the agreement have been met. These conditions vary widely based on the type of information or client the finder is hired to provide. If the finder is hired to provide a contact list of potential investors, the finder is typically paid only when a new contact has signed an agreement or made a formal investment in the business. If the finder is hired to find clients for a new accounting firm, for example, the finder would likely be paid when the new contact schedules an appointment with the business.
Restriction on competing activities
If relevant, this clarifies that the finder cannot operate on behalf of another party in the defined territory during the course of the agreement. This also sets out the specific period of time for which this is the case after the end of the agreement.
Fees
This details the finder’s fees and when interest can be charged on late payments. It also details when the client is required to pay the finder.
Expenses
This sets out what expenses, if any, the client will reimburse to the finder.
Independent Contacts
The term independent contacts refers to business contacts known to the client before engaging the finder. If the finder discovers any prospective investor or client who contacted the client or was contacted by the client before the effective date of the agreement, those contacts will not be considered to have been found by the finder. Similarly, if any prospective investor contacts the client or is contacted by the client after the end of the agreement, that contact will be independent of the agreement and will not be eligible for a finder's fee.
Confidentiality
This explains that the parties may have access to each other’s confidential information during the course of the agreement. It details that this information must only be used by the parties to meet their respective obligations under the agreement. It also clarifies that the information may not be disclosed to anyone apart from in limited circumstances or when disclosure is necessary to comply with the law.
Liability
This sets out the rules for when the client and finder may be liable for certain occurrences. It also sets out instances in which neither party is usually liable to the other’s losses and instances in which liability cannot be limited.
Non-Circumvention
A non-circumvention clause protects a finder from being bypassed in the business transaction by the parties going directly to each other. This clause ensures that once the finder makes an introduction, the client cannot then make use of the contacts without paying the finder's fee. If the finder is bypassed, the non-circumvention clause states that as a penalty, the finder must still receive the fee stated in the agreement.
Termination
This sets out how the Finder’s Fee Agreement can be brought to an end and how much notice must be given. It also sets out what happens when the agreement is ended. Specifically, it highlights that the client must immediately pay the finder their fees (including all outstanding unpaid invoices, unpaid interest charges, and unpaid fees for any service provision that invoices have not yet been raised for). It further highlights that the termination does not affect any rights, remedies, obligations or liabilities of the parties under the agreement except those intended to end on termination.
You can edit your document if you want your Finder's Fee Agreement to include more details or terms. If you do make changes, however, you may want a lawyer to review your Finder's Fee Agreement to make sure it complies with all relevant laws and meets your specific needs. To get your document reviewed, you can ask a lawyer for assistance after completing your edits.
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How to make your Finder’s Fee Agreement legally binding
Whether a Finder's Fee Agreement is legally binding depends on several factors.
First, the Finder's Fee Agreement must comply with state and federal laws that govern when a finder's fee may be paid. These laws may vary from state to state, and can also vary by industry.
Second, a Finder's Fee Agreement is a contract and therefore has to meet the elements of a contract , which are:
- An offer and acceptance of that offer.
- An agreement to pay or exchange value, often referred to as consideration.
- Capacity, meaning that each party must generally be competent and authorized to enter into the contract. In general, a party is competent to enter into a contract if they are 18 years of age or older and are capable of making their own decisions. If these elements are not met, the Finder's Fee Agreement may not be legally enforceable.
The Rocket Lawyer Finder's Fee Agreement meets the required elements of a contract. After you build your document, read the entire agreement to make sure it meets your needs. If you need to make changes, you can do so online, on the Rocket Lawyer app, or by exporting your document in Word format.
Once the agreement is in its final form, you can print, date and sign, or use RocketSign® to easily e-sign your agreement electronically. Once signed, the agreement is final and both parties should receive their own copy.
If you have any questions, you can always ask a lawyer for state and situation-specific guidance regarding your Finder's Fee Agreement.
Finder's Fee Agreement FAQs
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Who pays finder's fees?
Who pays the finder's fee will depend on the kind of business and the prior arrangement. For example, in some cases the finder's fee is paid by the buyer in a transaction. In other situations, the finder's fee is paid for by the seller. Additionally, in some cases, the finder's fee is treated more like a commission than a gift. This is why having these terms set in a Finder’s Fee Agreement is crucial.
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How do I get a finder's fee?
In order to get a finder's fee, you'll need to find a business or organization that is willing to pay one. Common scenarios for finder's fees include:
- A new business may work with a finder to build a list of potential clients.
- A real estate agent is seeking potential clients.
- A business is seeking new service providers.
- A new business is seeking potential investors.
Depending on the kind of arrangement, you could be paid either a percentage of a signed deal, or a predetermined amount. For example, $50 for each referral. In some cases, you may not be paid unless your referrals actually sign a contract with the business.
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When should a finder's fee be paid?
Ideally, the timing of a finder's fee payment is governed by the terms of the Finder's Fee Agreement. All the details about payment should be included in the written agreement. Often, the fee is paid after the business transaction with the identified lead occurs. In other arrangements, the finder is paid per referral, regardless of whether the referral leads to a business transaction.
The parties are free to determine the time of payment that best suits them. Putting that agreement in writing is smart as it can help to avoid uncertainty and misunderstandings, which can lead to a finder not getting paid.
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Are finder's fees tax deductible?
The IRS has pretty consistently found that finder's fees are not tax deductible.
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What is a finder's fee gift?
In many cases, the finder's fee may be considered like a gift from one party to another, as no legal obligation to pay a commission exists. However, businesses that offer finder or referral fees must carefully navigate laws that govern who can receive a fee and under what circumstances.
Certain professions, for example, cannot give or receive gifts from certain kinds of entities. Like lawyers, who may not "profit share" with non lawyers. Laws regarding gifts and referral fees vary from state to state, and federal laws can be unclear under certain circumstances or within certain professions. Ask an Attorney for more guidance in regard to your specific situation.
