Reseller Agreement: Everything You Need to Know
A reseller agreement can mean something different depending on who you ask. Typically, these are agreements where a vendor contracts with a reseller to allow them to sell the vendor's product or services to a third-party. 4 min read
A reseller agreement can mean something different depending on who you ask. Typically, these are agreements where a vendor contracts with a reseller to allow them to sell the vendor's product or services to a third-party. There is the potential for misunderstandings if the wrong terms are included in the agreement.
Questions to Ask in a Reseller Agreement
When you're trying to determine what type of reseller agreement to draft, ask several important questions to clarify:
- What is the expected type of relationship between the reseller and end customer?
- Will the licensor require a contractual relationship with the customer?
- Does the licensor require special rights to keep the customer from doing certain things with the product?
- Will there be any bundling or modifying of the product for resale?
- Will either the licensor or reseller have any support obligations towards the end consumer?
By having a conversation, you can avoid unintended delays and extra time spent drafting the agreement and verify that all the terms align with the client's business objectives.
SaaS Reseller Agreements
A SaaS reseller agreement is one where a software services provider, known as the vendor, grants the reseller rights to enter into contracts with customers, or third parties, to provide the vendor's services to the customers. There is a process specified that allows the reseller to enter into such contract agreements.
There are two methods by which these agreements may be formulated:
- Top-down agreement: Terms regarding how the reseller is allowed to contract with customers are set forth in the reseller agreement, usually in the form of a schedule. This arrangement is more useful for high-volume deals. These are generally more favorable for resellers and vendors but are not always the most practical option.
- Bottom-up deal agreement: Terms arise from negotiations between the reseller and customer. This type of agreement can cost significantly more and place an administrative burden on both the vendor and reseller, but they can be necessary for large corporate customers.
You may encounter instances where a customer wants the vendor added, but it's best to resist this idea. If the customer wants a direct relationship with the vendor, then the reseller should remove him or herself from the agreement and act as a referrer rather than the reseller.
Negotiating a three-party contract can create more mistakes, gaps, and ambiguities, not to mention the fact that they are more expensive to draft. If a customer requires services from the reseller, they can be addressed in a separate contract between the customer and the reseller. The customer is likely to prefer the three-party contract as they can attempt to impose joint and several liability on both the vendor and reseller in the case of a dispute.
Tips for Creating a Reseller Agreement
Creating a successful reseller agreement takes planning and strategy. The companies should complement each other in a way that creates options for revenues while presenting compelling reasons to conduct business together. It should contain proper economics and a program structure that provides a mix of investments that extends beyond the transaction-level margins.
Good reseller partners typically have similar characteristics, such as ability, desire, and capacity. They should have the ability to successfully implement the product, the desire to sell the product or service, and the capacity, or actual means, to deliver it.
Things to Include in a Reseller Agreement
All reseller agreements will differ based on the product, services, and parties involved. There are some general sections and information that any reseller agreement should contain:
- Agreement and effective dates
- Names and relationships of parties
- Appointment of reseller
- Purchase orders
- Accepting, modifying, rejecting, and canceling purchase orders
- Provision of products and replacement or repair of defective ones
- Delivery of products
- Product materials like marketing informational materials and regulatory documentation
- Acceptance and rejection of product deliveries
- What is deemed acceptance and rejection
- Product changes or service modifications
- All prices, discounts, and resale prices
- Changes in prices
- Reseller responsibilities
Pay attention to payments to ensure that no ambiguity or confusion arises. Be sure to spell out the following clearly:
- Invoice procedures and requirements
- Payment due dates and deadlines
- Interest on late payments
- Any other terms
Also, keep various legal theories and subjects in mind:
- Verbiage regarding limited warranties
- Parties' representations, legal rights, a disclosure schedule
- How intellectual property is handled
- No reverse engineering allowed
- License grants
- Confirm compliance with all local and federal laws, as well as export control laws
- Confidentiality clause
- Publicity and inspection of an audit of books and records
- Termination and its effects
- Limitation on liability
- How dispute resolution is handled
- Force majeure
If you need help with a reseller agreement, you can post your legal need on UpCounsel's marketplace. UpCounsel accepts only the top 5 percent of lawyers to its site. Lawyers on UpCounsel come from law schools such as Harvard Law and Yale Law and average 14 years of legal experience, including work with or on behalf of companies like Google, Menlo Ventures, and Airbnb.