This article is written by Shubham Singh, pursuing Diploma in Advanced Contract Drafting, Negotiation, and Dispute Resolution from LawSikho. The article has been edited by Ruchika Mohapatra (Associate, LawSikho) and Dipshi Swara (Senior Associate, LawSikho).
Table of Contents
Introduction
With the arrival of the internet, the workings of business and marketing have completely changed and the current day customer has better ways to research information about the companies and the products they are interested in. Lead marketing or lead generation marketing offers to attract those potential customers and convert them into buyers. The first step in lead marketing is to collect personal data about customers with their permission. The Companies use these data to know more about potential customers and respond to them with a custom response suitable for their needs. For this purpose, many companies come into contact with an agency to collect leads from them and later convert those leads into sales. To make this transaction smooth, legitimate and free of dispute they enter into a lead marketing agreement.
In this article, we will learn what is a lead marketing agreement, why it is required and what are the essential contents of a lead marketing agreement.
What is a lead marketing agreement?
A lead marketing agreement is made between a provider and a company or client in which the provider is supposed to provide the company with marketing leads (like phone number, email address, consumer data, call transfer data etc.) to the company for the purpose of marketing and sales. The agreement is made to ensure that the provider who enters into the agreement gets paid for the lead he is providing to the company or the client and the payment is not on the basis of the conversion of leads into sales by the company but, instead, payment is based on a per lead basis.
Significance of lead marketing agreement
Contrary to common opinion, any firm may have difficulties with clients and corporations. It’s completely natural because each and every one of them has different points of view and opinions. The key objective here is to remove these limitations and, more importantly, to make the workflow more effortless and fair.
While working with different clients, one will usually notice a significant gap between the client’s expectations and the amount of work one will actually be providing. To avoid any misunderstanding, the company and the client must come to an agreement that is unanimously approved by both parties. And moving further, a contract is required to be drafted, to avoid any issue which may happen later.
In some cases of lead marketing, the company will deny payment if the leads aren’t resulting in any conversion of sale, and the provider will not be able to do anything if there isn’t a contract present between them. To avoid that, both parties should draft a lead generation agreement to prevent any misunderstanding which may occur during the term of the transaction and to secure payment independent from the company’s capacity to convert the acquired leads into sale. An agreement for lead marketing also shows that the transaction happening between the parties is completely legitimate and both the parties are on the right side of the law. It also ensures that both parties are aware of what they are getting in this transaction.
Lead marketing agreements are frequently evaluated by law authorities while investigating as one of several ways to determine if the parties to the contract have taken reasonable efforts to prevent “data misuse” and safeguard customers’ personal information.
Key concerns to keep in mind while drafting a lead marketing agreement
While all lead marketing agreements are not the same and they differ in some way depending upon the relationship between the provider and the company, there are several key concerns to consider while drafting a lead marketing agreement.
- It is important to pay careful attention to customer protection-related contractual matters such as liability for the content of advertising and whether and under what conditions customer data can be sent.
- It is critical that the necessity for which the firm is engaging in this transaction with the provider be specified very carefully and clearly while creating this agreement. The objectives for which the leads are supposed to be utilised should be mentioned specifically in the contract and it shall clearly reflect what are the expectations of the company, while demands and expectations of the company can be anything they want to, as long as it is legitimate and reasonable.
- While drafting a lead marketing agreement, it should be kept in mind that the leads given under this contract will be paid on a per lead basis, regardless of whether the firm is able or not to convert the lead into sales.
- The circumstances under which leads are allowed to be transferred or assigned should be transparent and limited to those for which consent has been provided by the customers. Lead marketing agreements should also account for how customer data may and may not be used by third-party recipients, and liability should be apportioned appropriately where transfer to a third-party is fair and lawful.
- All the Parties subjected to the agreement must ensure that they follow all the rules, regulations and laws relating to the matter. And also, they have all the licenses and permits required to perform these kinds of transactions.
- The Parties also need to disclose all the current or past disputes or legal matters pending in any courts or tribunal of law with respect to the transfer for which they are entering into the agreement.
- If an event arises in which the terms or conditions of the agreement are breached by one of the parties then the consequences of those actions should be mentioned in the contract in a detailed manner.
- In the event of late payment or late performance of service, a penalty or interest should be levied against the defaulter.
Important clauses of the lead marketing agreement
Although every Lead Marketing Agreement is different from each other depending upon what kind of service the provider is going to provide and what the company is supposed to pay in return, a Lead Lead Marketing Agreement does not have to follow a precise form or structure. However, it may include but is not limited to the following clauses:
- Each Parties’ details,
- Recitals/preamble,
- Definition,
- Terms and conditions,
- Term and termination of the contract,
- Consequences of termination,
- Objectives and expectations,
- Product, commodities and services to be supplied by the provider,
- Consideration to be provided by the company,
- Penalties,
- Representations and warranties,
- Indemnification,
- Confidentiality,
- Dispute resolution.
Each parties’ details
This clause basically lays down all the important details of parties entering into the agreement. The name and address of all the parties entering into this contract should be mentioned in this clause. It may also contain information regarding the CIN Number of the parties under the Companies Act, 2013. This clause should also mention the authorised signatory who is going to look over this transaction.
Recitals and preamble
The Recital clause in a Contract informs us about the background of the agreement telling us about the purpose for which both parties have entered into this contract. It is a boilerplate clause that tells us about the intentions of the parties. It is also very helpful in telling us about the present status of the parties and for the interpretation of the Contract.
A sample Clause can be:
WHEREAS, EduTrades is in the business of developing, producing and marketing post-secondary educational curriculum on securities and financial investment and asset protection;
WHEREAS, Whitney has entered into an Administrative Services Agreement with EduTrades to manage and maintain EduTrades’ customer leads database (“Database”);
WHEREAS EduTrades is interested in soliciting Whitney’s services with respect to marketing efforts to be conducted and targeted at the Database, and EduTrades desires to enter into a binding agreement with Whitney, in accordance with the terms and conditions set forth below.
Definition
The specified terms in a legal document are defined by definition clauses, often known as contract definitions. The inclusion of definitions clauses reduces the risk of misunderstandings between the parties. The contents in the definition clause should be in clear and simple language and it should never be ambiguous. It is of very importance to Capitalize the defined term everywhere in the Agreement.
Terms and conditions
The terms and conditions clause in this agreement acts as the set of rules and regulations in the said contract which all the parties must follow in order to execute the contract. This clause creates a guideline for the parties to follow, and failure to comply with it may result in penalties, termination and indemnity.
Term and termination of the contract
The term clause specifies the duration (days, months or years) for which the agreement is entered. It should mention the commencing date of the contract and the date on which the contract is supposed to expire.
The termination clause specifies all the circumstances under which the agreement can be terminated. The termination clause should be drafted very carefully as any mistake or gap can be critical and may result in a dispute.
Consequences of termination
The clauses termination and consequences of termination go hand in hand and after drafting the termination clause the consequences of termination is a must to draft. This clause informs us about the after-effects of the termination and contains details about the duties, obligations and rights of both parties after the contract has been terminated.
Objectives and expectations
Every party has some specific objectives and expectations while entering into an agreement. The Parties should mention those objectives and expectations very clearly in the agreement.
This clause includes all the objectives and goals they are expecting to achieve during the duration of this contract. It should be stressed that the parties’ goals and expectations should be acceptable and practical.
Product, commodities and services to be supplied by the provider
In a lead marketing agreement, the provider is supposed to transfer leads in exchange for some consideration. This clause contains details about the product, commodities and services to be supplied by the provider during the duration of this contract.
Consideration to be provided by the company
In exchange for the leads supplied by the provider during the transaction, the company pays some consideration to the provider. This clause must specify that the payment is on a lead per basis whether the company is successful in converting those leads into sales or not.
Penalties
The purpose of the lead generation agreement is to protect the parties entering into this contract from having a dispute. Whenever a party fails to comply with the agreement, it will result in a penalty. This clause specifies the kind of penalty the party at fault will have to pay.
For example, if the company fails to settle the transaction on time, they may have to pay a penalty fee in addition to the payment they were supposed to make. Or, if the provider does not deliver the lead on time there may be a deduction on the payment which they were supposed to receive according to this agreement.
Representations and warranties
Every agreement is based on some fundamental collection of facts (such as ownership and title) or claims about the quality of the product or service. And this clause mentions all of these underlying facts as representations and warranties. The violation of this clause may result in a penalty and it can also be the cause for the termination of the contract.
Indemnification
A violation of responsibility or breach by one party may end up causing loss to the other party. That is why an indemnification clause is present in an agreement to protect the other party from any such loss.
Confidentiality
In a lead marketing agreement confidentiality is of very much importance. This clause specifies the information which is supposed to be confidential. What are the parties expected to do in order to keep the information confidential? What are the circumstances under which the parties can share confidential information? What are the parties supposed to do if there is a violation of confidentiality?
Dispute resolution
There are some chances that during the duration of the contract a dispute may arise between the parties. This clause specifies how the dispute is going to get resolved. What method of dispute resolution the parties are supposed to utilize, mediation, arbitration, consultation or a combination of them?
It is suggested to keep the dispute resolution clause as concise as possible so that the contract can be enforced quickly.
Apart from all these clauses, a lead marketing agreement should include everything else as per the requirements of the parties for a swift transaction between them. These requirements should be reasonable, legitimate and realistic.
Conclusion
A lead marketing agreement is an essential document for both the company and the provider. It ensures that the transaction between the parties is legitimate. It can be used to establish the rights and obligations of both the parties and also to penalize a defaulting party and indemnify the loss-making party. Entering this agreement also helps in clarifying the basic expectations of both parties. The above principles can be used to draft a decent agreement for lead marketing but the most important point to consider is that every lead marketing agreement is different and the requirements of every party entering into this agreement are also different. So, the lead marketing agreement shall be drafted specifically to the needs of the parties entering the agreement.
References
- https://www.mca.gov.in/Ministry/pdf/CompaniesAct2013.pdf
- https://contracts.onecle.com/edutrades/whitney-marketing-2005-08-01.shtml
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