💡 Plain English Explanation

Referral relationships are the lifeblood of many professional services businesses. Lawyers receive referrals from other attorneys, CPAs refer clients needing legal work, consultants receive introductions from executives they have served. These networks are built over years and represent significant relationship capital.

This clause protects information about referral sources, intermediaries, and business development contacts. When firms share information about their referral networks, whether for collaboration, joint ventures, or due diligence, they need assurance that this information will not be used to compete against them or to bypass their relationships.

Referral source protection typically covers:

⚠ Why This Clause Matters

For the Professional Services Firm: Your referral network is a strategic asset. If a competitor learns who sends you business, they can target those relationships. If a client learns about your referral sources, they might approach those sources directly or try to bypass your firm in future matters. This clause protects years of relationship-building.

For the Receiving Party: You need to understand the boundaries of this protection. Can you contact someone you met through a disclosure? Can you develop your own relationship with a mutual contact? Clear limitations help prevent misunderstandings and disputes.

Regulatory Considerations: Some professions have rules governing referral fees and relationship disclosures. For lawyers, referral fee arrangements must often be disclosed to clients. This clause should not create conflicts with professional responsibility obligations.

📄 Clause Versions

Balanced Version: Protects specific referral source information while acknowledging that parties may have pre-existing relationships with the same contacts. Includes reasonable exceptions for publicly known relationships and independent contacts. 
"Referral Source Information" means confidential information regarding the Disclosing Party's sources of business referrals and business development relationships, including:

(a) the identity of individuals and organizations that refer business to the Disclosing Party;
(b) the nature and history of referral relationships, including frequency, types of matters, and success rates;
(c) any referral fee arrangements, compensation structures, or reciprocal agreements;
(d) business development strategies, target relationships, and pipeline information;
(e) introductions, contacts, and relationship histories shared in confidence; and
(f) the terms of any referral or introducer agreements.

The Receiving Party agrees to:
(i) maintain the confidentiality of all Referral Source Information;
(ii) not use Referral Source Information to solicit referrals from the Disclosing Party's sources;
(iii) not disclose Referral Source Information to competitors of the Disclosing Party; and
(iv) not interfere with the Disclosing Party's referral relationships.

This clause does not restrict the Receiving Party from:
(i) maintaining or developing relationships that existed prior to receiving Referral Source Information;
(ii) contacting individuals or organizations through independent channels not derived from Referral Source Information;
(iii) responding to unsolicited contact from any person or organization; or
(iv) engaging in ordinary networking and business development activities in the normal course of business.
Disclosing Party Favor: Maximum protection for referral networks with broad definitions and strong non-solicitation provisions. Ideal for firms sharing sensitive relationship information during mergers, partnerships, or major collaborations. 
"Referral Source Information" means any and all information relating to the Disclosing Party's referral relationships, business development activities, and professional network, including without limitation:

(a) the identity of any individual or organization that has referred, does refer, or may refer business to the Disclosing Party;
(b) all information regarding the nature, terms, history, and value of any referral relationship;
(c) all referral fee arrangements, finder's fee agreements, and compensation structures;
(d) all reciprocal referral arrangements, co-counsel relationships, and strategic alliances;
(e) all business development strategies, prospect lists, and relationship cultivation plans;
(f) all information regarding introductions, networking contacts, and professional relationships;
(g) the sources of specific engagements or matters, and the chain of introduction leading to such engagements; and
(h) any analysis of referral patterns, success rates, or relationship value.

The Receiving Party acknowledges that Referral Source Information represents valuable relationship capital developed over many years. The Receiving Party shall:

(i) treat all Referral Source Information with the strictest confidence;
(ii) not directly or indirectly contact, solicit, or cultivate any person or organization identified in Referral Source Information for purposes of developing a referral relationship;
(iii) not disclose Referral Source Information to any third party for any purpose;
(iv) not use Referral Source Information to compete with the Disclosing Party;
(v) not interfere with, disrupt, or damage any referral relationship of the Disclosing Party;
(vi) not hire or engage any person identified as a referral source without prior written consent; and
(vii) immediately notify the Disclosing Party if approached by any person identified in Referral Source Information.

These obligations survive termination of this Agreement for a period of five (5) years and apply regardless of how the Receiving Party may have independently learned of any referral source.
Receiving Party Favor: Narrower protection limited to specifically identified referral sources and formal arrangements. Preserves freedom to network and develop relationships in the ordinary course of business. 
"Referral Source Information" means only the following, when expressly identified as confidential in writing:

(a) the specific identity of individuals or organizations that the Disclosing Party has designated in writing as key referral sources;
(b) the specific terms of written referral fee or finder's fee agreements; and
(c) confidential business development strategies specifically disclosed under this Agreement and marked as such.

Referral Source Information does not include:
(i) the general fact that professionals in a particular industry or practice area make referrals;
(ii) publicly known relationships, including relationships disclosed in marketing materials, press releases, or professional directories;
(iii) contacts and relationships that the Receiving Party had prior to this Agreement or develops independently;
(iv) individuals or organizations known to the Receiving Party through industry associations, conferences, or general networking;
(v) contacts who independently approach the Receiving Party; or
(vi) general information about the Disclosing Party's market position or client base.

The Receiving Party may:
(i) maintain all existing relationships with any person or organization;
(ii) respond to any inbound inquiry or unsolicited contact;
(iii) engage in normal business development and networking activities;
(iv) work with mutual contacts on matters unrelated to the Disclosing Party's business; and
(v) hire employees or contractors without regard to their relationship history with the Disclosing Party, unless subject to a separate non-solicitation agreement.

Restrictions on contacting referral sources shall apply only during the term of this Agreement and for twelve (12) months thereafter, and only to referral sources specifically identified in an exhibit hereto.

💬 Key Considerations