Whether you are working for a finders fee, a one-time fee, or a strictly qualified payment term product or service, you may need a fee agreement to get everything settled. The fee agreement helps parties know exactly how much to expect, and if the fee is variable, includes calculations for your client to understand how much is due.
Well defined fee structures are put in place to increase the efficiency of your business or industry and reduce headaches of contract negotiation, customization, and lengthy processes involving attorneys. Incorporate the efficiency of a well-formed fee agreement into your business processes today!
You’ll need to do all of the proper research and homework first, but this template will give you a head-start and a good framework. You should always consult a lawyer though before finalizing any contracts.
A fee agreement is a binding contract, describing the relationship between the service provider and another party, commonly referred to as the client. Fee agreements can be used by finder organizations, such as sales representatives, headhunters, or referral companies, to monetize the service of providing referrals. When Uber accepts an offer for hiring private transportation, it collects a finders fee as a variable percentage commission for each contract it provides to the subcontractor drivers that act as clients, paying the referral fees.
These types of predetermined arrangements can be very efficient because the work is highly defined and the fees are either flat or work on the basis of a calculator system. If the fee is calculated based on a formula, this formula is defined in writing within this fee agreement, so that all parties can easily understand what fees are due.
Formulas for the fees can be based on a number of different things. Usually, the fee scales up or down based on the size of the job. For example, if a package needs to be delivered 600 miles, the per-mile rate is multiplied by 600. But other conditions need to be assessed as well, such as if the package needs to be sent first class, or expedited.
These conditions can be included in an additional section and can be flat rates, proportional to the overall amount, or some other formula. Many conditions and contingencies can be strung together to make complex formulas that fit a wide variety of scenarios. For example, you can stipulate a bonus for completing the project early or a discount for completing late. Another common contingency is the “pro-rata refund,” in which case a flat fee is paid upfront and a pro-rated rebate is paid back, if part of the service remains unused, or if other conditions are met by the client.
When services are performed, they can typically be performed to different standards. If there is a legal requirement for a particular action to be taken during the course of work, this should be disclosed. Services can have standards, certifications, and other benchmarks for quality applied, which define standard operating procedures (or SOP’s). If these benchmarks are not met, specific terms within the fee agreement may stipulate penalties, outright nullification of the contract, or granting of rights to the client to nullify, extend, or other preferential terms to appease the client.
For this template, we have defined it as an Offer with the possibility of Acceptance. As such, it contains everything required in US general commerce law to be unilaterally in effect, which an offer needs. Signed by the Provider only, the fee agreement and its stipulations constitute an Offer. This offer can then be valid for a restricted amount of time, after which, if not accepted by the client, the offer will automatically become void. You may have heard these terms on a coupon: offer void if not redeemed by x date, etc. This terminology is part of the one-way binding legal agreement structure.
For convenience, the offer always is paired with an acceptance section. In this section, prospective clients can sign and communicate to the Provider that they accept the offer (usually by mailing, emailing, or signing in person). Then, once accepted, the contract is considered to be duly executed, and in-force. Additional terms of leniency can be used as well, which increases the contract’s validity in court. Clauses which contribute to the contract’s strength and enforceability can be a “cold feet” or “back out” period, allowing clients to unilaterally cancel, or a “cool-down” clause, allowing clients to read, understand and hire a lawyer. These clauses prevent clients from claiming that they didn’t understand the contract, or dismissing it due to minor technicalities.
If the offer does not include certain terms, then it is considered to be merely an “advertisement.” Advertisements and offers are very similar concepts legally, but advertisements are generally less rigid. In general, an offer requires a limitation on time period, and disclose all relevant and reasonable contingencies or conditionals that negate the offer. On a coupon, which is a valid offer, the fine print is necessary in order to create a unidirectional contract. If you look at an advertisement, you may notice that there is actually a disclaimer stating that it is not an “offer,” or that offer terms are available in some other place. In order to be an offer, it must include the delivery date, price, terms of payment, date of payment, and detailed description of goods/service, and condition of those goods (i.e. “new”).
One good example of another type of unilateral contract is a EULA, or End-User License Agreement. Instead of signing the contract, you as the user Use the software. This act serves as the binding performance of consideration, which means that you are a party to the contract. No fee needs to be exchanged, but parties are still bound in most scenarios.
Fee Agreements are complex tools that can fit a large number of efficient business types. If your business has the main components of a rigid calculation of the amount due, well defined time periods for acceptance, delivery, payment, and detailed description of the goods or services, then a fee agreement may be right for you. We have included many of the relevant terms, but keep it in mind that your jurisdiction may require something specific that we haven’t included here.