What is a referral partner agreement?
Is a referral partner agreement legally binding in South Africa?
“In fact, in the absence of an express provision to that effect, it is difficult to imagine circumstances indicating that the parties intended to be bound in perpetuity.”
“The processing of personal information of a data subject for the purpose of direct marketing by means of any form of electronic communication, including automatic calling machines, facsimile machines, SMSs or e-mail is prohibited unless the data subject— (a) has given his, her or its consent to the processing; or (b) is, subject to subsection (3), a customer of the responsible party.”
“Any member of the private sector … is guilty of an offence if a person associated with that member of the private sector … gives or agrees, or offers to give any gratification prohibited in terms of Chapter 2 to another person, intending to obtain or retain— (a) business for that member of the private sector …; or (b) an advantage in the conduct of business for that member of the private sector …: Provided that no offence shall be committed where that member of the private sector … had in place adequate procedures designed to prevent persons associated with that member of the private sector … from giving, agreeing or offering to give any gratification prohibited in terms of Chapter 2.”
“A person must not promote, offer, supply, agree to supply, or induce a consumer to accept any goods or services on the representation that the consumer will receive a rebate, commission or other benefit if— (a) the consumer subsequently— (i) gives the supplier the names of consumers; or (ii) otherwise assists the supplier to supply goods or services to other consumers; and (b) that rebate, commission or other benefit is contingent upon an event occurring after the consumer agrees to the transaction.”
When you need a Referral Partner Agreement
- You pay, or want to pay, someone outside your business — a consultant, a complementary supplier, an industry contact or a past client — a fee for introducing customers who sign up.
- You run a software or tech business and are launching a partner or affiliate programme in which agencies, implementers or websites recommend your product for a share of the first year’s subscription.
- You are the referrer — an IT support firm, a bookkeeper, a marketing agency — and want certainty that you will be paid for the customers you introduce, including deals that close after the relationship ends.
- A referral arrangement started on a handshake or a WhatsApp message, and there is now doubt about who introduced whom, what is owed, or whether the fees ever stop.
- Your referrals involve passing on people’s contact details, or the referrer has a link to the customer — as its employee, adviser or procurement contact — that has to be managed under POPIA and the Corrupt Activities Act.
What a Referral Partner Agreement should contain
Role, independence and no authority to bind
Describe exactly what the partner does — identify and introduce potential customers — and what it may not do: quote prices, negotiate, sign, accept payment or make promises about your product beyond your approved marketing material. Record that it runs an independent business and is not your agent, partner or employee, and set the rules for using your name and logo. The more you let a partner speak for you, the closer it comes to being your agent, and under section 113 of the Consumer Protection Act a principal is jointly and severally liable with its agent where the agent is liable under that Act (criminal liability excepted).
Lead registration, attribution and competing referrals
Set up a simple, provable way to claim a lead: a registration form, portal or tracked link, with the details required and a time stamp. State how long a registration stays valid (for example 90 days), that leads already in your pipeline and existing customers do not qualify, and that the first complete registration wins if two partners introduce the same customer. For online partners, define the tracking method, the link or code window, and what happens when a customer arrives through two links. Make your records decisive unless they are shown to be wrong.
When the fee is earned, how much, and when it is paid
Choose the trigger deliberately — a qualified introduction, a signed customer contract, or cash actually received — and define each term. State the base (first invoice or first-year revenue, net of VAT and discounts), whether the fee is once-off or recurring, any cap, and the payment date, for example 30 days after the customer pays you. Require the partner to confirm its VAT status: a registered vendor must issue a tax invoice within 21 days of the supply, and a partner that is not registered must not charge VAT at all.
Clawback, refunds and set-off
Say what happens when a referred customer cancels, is refunded, defaults or never pays: an unpaid fee falls away, and a fee already paid is repaid or set off against future fees if the customer is lost within a defined window, such as six months. Without an express clawback you may have no clear contractual right to recover a fee once it has been earned and paid.
Term, termination and the tail
Fix the duration, how either party may end it, and — critically — what survives: fees on leads registered before termination that convert within a defined tail period, and whether recurring fees continue after the partnership ends, and for how long. In Plaaskem v Nippon Africa Chemicals [2014] ZASCA 73 the Supreme Court of Appeal had to imply a right to end, on reasonable written notice, a deal paying 15% of gross profit that said nothing about its duration. Write the term and the tail down rather than leave them to a court.
Sharing the lead’s personal information (POPIA)
Require the partner to get the lead’s agreement before passing on any details, to share only what you need, and to keep a record of that agreement. Under POPIA you may collect a person’s details from someone else where the person has consented to that (section 12(2)(b)), but you must still tell the lead what you collected and where it came from, before collection or as soon as reasonably practicable afterwards (section 18). Prohibit the partner from sending electronic marketing about your business except in line with section 69, and keep any conversion reports you send back to the partner to the minimum it needs.
Confidentiality and non-circumvention
Protect your pricing, pipeline and product plans, and the partner’s client information, with a mutual confidentiality clause. Add a non-circumvention promise tied to specific registered leads: you will not deal with a registered lead behind the partner’s back to avoid the fee during the protection period, and the partner will not steer that lead to a competitor. If the partner is itself a competitor, keep the restriction lead-specific — a broad agreement not to approach each other’s customers can amount to dividing markets by allocating customers, which section 4(1)(b)(ii) of the Competition Act prohibits between competitors.
Anti-bribery, conflicts and disclosure
Require the partner to confirm that it is not employed by, and does not advise, any customer it refers — or, if it does, that the customer has agreed to the fee in writing. Prohibit it from passing any part of its fee, or any gift or other benefit, to anyone at the customer, and give yourself audit and immediate termination rights, with tainted fees forfeited. These terms help build the adequate procedures that, under section 34A of the Corrupt Activities Act, keep your business from being guilty of an offence when someone performing services for it pays a bribe to win it work.
Referral partner vs sales agent, commission sales rep and reseller
| Feature | Referral partner | Sales agent | Commission sales rep | Reseller |
|---|---|---|---|---|
| What they do | Introduces a potential customer, then steps back | Solicits and may conclude sales on your behalf | Actively sells your products, often to targets | Buys your product and resells it as its own |
| Authority to bind you | None | Only within the mandate you give | Usually limited to your price list and terms | None — contracts in its own name |
| Who the customer contracts with | You | You | You | The reseller |
| How they are paid | Referral fee per converted introduction | Commission on sales | Commission, sometimes with a retainer or salary | Its own margin on resale |
| Your control over how they work | None — it runs its own business | You set the mandate and its limits | Often significant | Commercial terms only |
| Main legal risk to manage | Fee disputes, POPIA lead-sharing, secret commissions | Authority and the agent’s duties of good faith | Being treated as an employee (LRA s 200A) | Resale-price rules (Competition Act s 5(2)) |
Common South African pitfalls
- Paying “on introduction” without defining it. Every name dropped in conversation then becomes a fee claim. Define a qualified introduction — a registered lead you did not already know, who agrees to engage with you — and decide whether the fee is earned on introduction, on signature or on payment.
- No end date and no tail. An open-ended deal invites claims on every renewal, years later. In Plaaskem the parties went all the way to the Supreme Court of Appeal before it was settled that a percentage-of-profit arrangement with no stated duration could be ended on reasonable written notice.
- Letting the partner mail its list about you. A partner’s own customer relationships do not cover marketing your products: the customer exception in POPIA section 69 is limited to the sender’s own similar products or services. Email, SMS or WhatsApp campaigns sent without consent breach the Act, and the complaints land on your brand.
- Paying the customer’s own people. A referral fee to a customer’s employee, procurement officer or trusted adviser, without the customer’s informed agreement, can be an offence under the Corrupt Activities Act — and section 34A can make your business guilty if a partner pays bribes to win you work and you had no adequate procedures in place.
- Turning customers into paid referrers without checking the CPA. Section 38 of the Consumer Protection Act prohibits inducing a consumer to buy on the promise of a commission or other benefit for later passing on names or helping you sell to other consumers, where the reward depends on something that happens after the consumer agrees to buy. Have a refer-a-friend scheme checked before you launch it.
- Letting a referrer drift into selling. Once a partner quotes, negotiates, works to your targets and hours, or works only for you, it starts to look like a sales agent or even an employee — with the authority, duties and labour-law risks that come with those roles. Keep the agreement, and the way the relationship actually runs, aligned.
Frequently asked questions
What is the difference between a referral partner, a reseller and a sales agent?
A referral partner only introduces a potential customer and is paid a fee if the introduction becomes business; the customer contracts with you. A reseller buys your product and resells it in its own name for its own margin, so the customer is the reseller’s. A sales agent goes further than an introduction: it solicits and may conclude sales on your behalf within the authority you give it, and owes you an agent’s duties of good faith.
Could a referral partner be treated as my employee?
It is unlikely for a genuine referrer that runs its own business and refers occasionally, but the risk grows if you control its hours or methods, it works only for you, or it depends on you economically. Under section 200A of the Labour Relations Act, a person who does not earn more than the threshold set under the Basic Conditions of Employment Act is presumed to be an employee if any one of seven listed factors is present, until you prove otherwise.
When is a referral fee earned if the agreement does not say?
That is exactly the dispute a written agreement should prevent. If the trigger is not defined, the partner will argue that the introduction alone earned the fee and you will argue that nothing is due until the customer signs or pays, leaving a court to work out what you both meant from the wording and the circumstances. State the trigger expressly: a qualified introduction, a signed customer contract, or cash actually received.
Do I have to keep paying referral fees after the agreement ends?
Fees already earned when the agreement ends remain owing, but whether the partner earns anything on deals that close later, or on renewals, depends on the wording — which is why the agreement needs a defined tail, such as fees on leads registered before termination that convert within six months. In Plaaskem v Nippon Africa Chemicals the Supreme Court of Appeal held that an agreement paying 15% of gross profit on sales resulting from the other party’s endeavours, with no stated duration, could be ended on reasonable written notice — but it took an appeal to establish that.
May a referral partner email or WhatsApp its contacts about my business?
Only within POPIA section 69, which prohibits direct marketing by electronic communication unless the recipient has consented or is the sender’s customer — and the customer exception covers only the sender’s own similar products or services, not yours. A partner that wants to promote your business to its contact list therefore generally needs those contacts’ consent first, which it may ask for only once and in the prescribed form. Every marketing message must also identify the sender and give contact details for opting out.
Can I pay a referral fee to someone who works for, or advises, the customer?
Not secretly. The Prevention and Combating of Corrupt Activities Act treats a commission as a gratification, and it is an offence to give an unauthorised gratification to a person in an employment relationship in respect of their work (section 10), or to pay an agent — which includes a director, officer, employee or other person authorised to act for a principal — to act in breach of trust or in a biased way (section 6). The safe course is that the customer knows about and agrees to the fee in writing before anything is paid; if it will not agree, do not pay.
Must a referral partner charge VAT and give me a tax invoice?
Only if it is a registered VAT vendor, in which case the VAT Act requires it to issue a tax invoice within 21 days of the supply. A partner that is not registered must not add VAT to its fee — wilfully charging VAT where none is payable is an offence under section 58 of the VAT Act. You may issue the partner’s tax invoices yourself (self-billing) only where you are both vendors, you have agreed that the partner will not issue its own, and SARS has given prior approval under section 20(2).
Can I pay a referral fee for introducing a buyer or tenant for property?
Be careful. The Property Practitioners Act 22 of 2019 defines a property practitioner to include a person who, for gain and on behalf of another, canvasses a buyer, seller, tenant or landlord of property or of a business undertaking, and section 56(1) says a property practitioner is not entitled to any remuneration for that work unless it held a Fidelity Fund certificate at the time. An uncertified introducer can therefore have no right to the fee and must pay over any fee it receives to the Fidelity Fund, so check the referrer’s status before agreeing to pay.
Sources & authority
- Plaaskem (Pty) Ltd v Nippon Africa Chemicals (Pty) Ltd (574/13) [2014] ZASCA 73; 2014 (5) SA 287 (SCA); [2014] 4 All SA 12 (SCA) (29 May 2014)
- Protection of Personal Information Act 4 of 2013, ss 1, 12, 18 and 69
- Prevention and Combating of Corrupt Activities Act 12 of 2004, ss 1 (“agent”, “gratification”), 6, 10 and 34A
- Consumer Protection Act 68 of 2008, ss 38 (referral selling) and 113 (vicarious liability)
- Competition Act 89 of 1998, ss 4(1)(b)(ii) (restrictive horizontal practices) and 5(2) (minimum resale price maintenance)
- Value-Added Tax Act 89 of 1991, ss 20(1), 20(2) and 58(1)(a)
- Labour Relations Act 66 of 1995, s 200A (presumption as to who is an employee)
- Property Practitioners Act 22 of 2019, ss 1 (“property practitioner”) and 56
This guide is general information, not legal advice. It reflects the law as at October 2026.