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
● Taxes
● 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
● Indemnification
● Publicity and inspection of an audit of books and records
● Termination and its effects
● Limitation on liability
● How dispute resolution is handled
● Force majeure