What does a reseller agreement mean?
A vendor or wholesaler signs a contract with another party, saying they will sell their goods. This is called a reseller agreement. The legally binding agreement spells out what each party is responsible for, such as setting prices, limits on quantities, and sales strategies. Aside from that, it limits how much power each party has over marketing activities connected to the product and sales process.
Businesses often use resellers to get their products seen by more people and find new users. Sometimes, resellers bring in money for the company in different ways (for example, white-label goods).
In any case, a reseller agreement is a contract between the company that makes the product and the person who sells it on their account. When a business uses resellers to make money, it needs to have a legal contract to ensure that the goods it sells have the same message, quality, and prices.
Like words
- Contract with a reseller
- Contract to sell
- Agreement for resellers to use software
- Agreement to sell SaaS
Why Reseller Agreements Are Important
For the parent company, the reseller approach is constructive. It also gives the dealer a business chance they wouldn’t have had otherwise. To ensure that both sides benefit from the connection, working out the details of a legally binding contract beforehand is essential.
This is why reseller deals are essential.
Offer legal safety to both sides. Companies that make goods are worried about how their products are portrayed, maintained, and sold when a partner sells them. A reseller agreement spells out the rules both parties must follow to keep the connection going.
Give specifics about the prices. Reseller deals spell out how prices should be set. That way, the reseller can’t sell the products for less than the company does, and the company can be sure that only approved resellers are selling its goods.
Clear up any confusion by stating what you expect. Legal agreements ensure that both parties know their responsibilities in different scenarios. This prevents misunderstandings or assumptions that cause relationships to become tense.
Describe who has control over marketing efforts. When a reseller sells a company’s product, they need brand standards, messaging, and price rules to ensure the message is the same across all channels.
Give the parent company an edge over its competitors. For the most part, reseller partnerships aren’t “free marketing.” But there are more sales of the same goods without any extra costs. Many businesses choose to work with resellers to get more exposure in a particular area or reach a large customer base that the company can’t reach on its own.
There is more trust between the seller and the buyer because of them. It’s like a promise: “I won’t take advantage of you, and you won’t take advantage of me.” Both sides agree to follow the contract terms and do business in a way that benefits them.
Ensure the quality and consistency of the goods. There are always rules in reseller agreements about the goods the reseller sells and how much they charge for them. That way, buyers don’t have very different experiences with the product based on where they bought it.
Different Kinds of Reseller Deals
Reseller agreements are an essential part of any plan for managing partner relationships. However, the reseller business comes in several different forms. If a business uses resellers differently, its reseller deal will be different.
Agreement to Sell Authorized Products
A business the parent company has permitted to sell its goods is called an authorized reseller, also called an authorized dealer. It is a separate business, usually one that sells items from other brands.
A merchandising and distribution deal is what an authorized reseller partnership is. It tells you how to list, sell, and send goods to customers.
It also gives the reseller the right to set up these goods without the parent company having to step in. For instance, a trusted partner of a cell phone company would need permission to set up service plans for customers. The steps for doing that are laid out in authorized dealer agreements.
Agreement for White-Label Resellers
One type of white-label reseller is a private-label reseller. This type of business sells goods under its brand name instead of the parent company’s. The parent company makes the goods branded and sold as if the reseller made them.
A white-label reseller relationship is an agreement to make and sell something. It outlines the steps for branding, packaging, selling, and advertising goods that a different company makes.
The reseller may be able to say that they use parts or equipment from the parent business in some white-label terms. Customers will know that their goods come from a trustworthy source while still being linked to the reseller brand. Some parent vendors don’t want this to get out because they think it hurts their image.
Both parties agree not to use trademarks or copyrighted material in white-label reseller agreements. The parent company doesn’t want its brand to be linked to illegal goods, and the reseller doesn’t want to be accused of copyright infringement.
Agreement for Selling Software
This type of business either sells a white-label SaaS product or gets permission from a provider to sell software under its name.
A software dealer agreement is primarily a license agreement for intellectual property. Most of the time, it includes limits on:
- How do I use the computer program?
- Who is in charge of the customer information and source code?
- Which types of programs can I buy or rent?
- How much money does the company that sells things make with each one?
- How and when does the dealer get paid for the items they sell?
The agreement also defines how the software provider and reseller will work together. The reseller may have a lot of freedom so that it could be anything from a simple commission system to a full-on joint business.
Agreement for Service Reseller
Some businesses and agencies offer professional services and use white labeling for some or all of their services. It’s mainly used for digital products like SEO and PPC ads, specifically for full-service digital marketing firms.
They can provide a full range of services without building the complicated infrastructure to run them themselves because they are resellers. As an illustration, an online marketing company might provide SEO checks as part of a web design plan. They send their clients’ information to a trusted SEO partner, who can make them in less than an hour since SEO isn’t their primary business.
A service reseller deal is a sub-licensing agreement that works like white-labeling. In it, it lists:
Figure out how much the dealer will pay the parent company for the services (most companies have a special package for white-label agency partners).
The things and services the seller gives you
Non-compete, non-disclosure, and confidentiality agreements, so the parent company can’t try to get the reseller’s customers.
How the dealer can get paid
There are limits on how intellectual property and advertising materials can be used.
Many agreements are simple, but service reseller agreements are more involved. Because services are more involved than ready-made software or products, the agreement must be clear about how to work together and pay each other.
Agreement for Non-Exclusive Resellers
More than one person can also use any of the above arrangements as a reseller. A non-exclusive distribution agreement lets a seller work with multiple resellers in the same market or region. It’s a good choice for businesses wanting to reach more people or grow their market position elsewhere.
When no exclusivity clauses exist in a deal, the parent company can look for new business opportunities and other partners. It also lets resellers work with rivals if they want better terms or to get resources from a different source.
Not only that, but it’s also essential to be careful and think about non-exclusive deals. For example, resellers might not want to push products if they know the parent business is working with other resellers in the same market. This can cause problems, so when businesses write their deals, they should be clear about what they expect.
Master Agreement for Resellers
A “master reseller” is a reseller who has overall power over the “general resellers” below them in the chain of distribution. They are in charge of things like training, help, pricing, success metrics, and customer service, and they have more power than regular resellers.
Most of the time, master resellers have other people who work under them and can sell their goods. They don’t have to deal directly with customers all the time; they only need to oversee their sub-distribution network and ensure all of their suppliers follow the rules and provide excellent customer service.
As part of a master reseller agreement, the master is responsible for managing goods at all stages of the distribution chain. This is not the same as an average reseller’s job. It also says how the master reseller will be paid for their services. There may be an extra fee or commission system in place for them. In some cases, they may get a cut of the profits for putting in so much.
Agreement for Exclusive Reseller
An executive dealer or distributor is someone with full rights to sell a product or service in a particular area. Aside from marketing efforts, they oversee all sales and customer service in their area.
A reseller who signs an exclusive reseller agreement is the only one who can sell the goods in a particular area. This means that no other company can sell those products. It also has delivery times, service level agreements, and the rules for how the reseller will be paid for their services. It also says what will happen if something goes wrong or the deal is broken.
When a company wants a foothold in a new market but isn’t ready to open its store yet, exclusive reseller deals can help. Customers will be more likely to stick with the exclusive reseller because they know they are the only one who sells that product or service.
Agreement for Value-Added Resellers
If you buy something already made and then add something to it to make it your own, that person is a value-added reseller (VAR). They can improve, change, or even repackage the goods to make them better than the customer expected.
The VAR deal tells the reseller how much freedom they have to change the product. It also tells them what kind of help they can get from the parent company, if the product comes with a warranty, and how much price control they have.
Companies that want to improve their value proposition to customers without starting from scratch can use a VAR deal. In addition, it lets the business use its current goods and services to grow its market share.
People Who Have an Interest in Reseller Agreements
Reseller agreements are used in almost every area in some way. It’s even more critical for companies to keep all their teams updated on any changes, updates, or new deals as their reseller programs get more extensive.
The sales team sends the partner agreement and takes care of order forms.
The legal team sets the contract terms and oversees any changes or additions to its text.
Contract managers are always in charge of ensuring processes are followed and carried out.
The customer success team ensures customers understand their rights and responsibilities under the contract and keeps an eye on whether they are followed.
The financial department is in charge of keeping payments and reviewing bills.
When a deal is made, sales, RevOps, finance, and C-suite executives approve and sign the contract.
Product and engineering team members impact decisions by giving their opinions on the time and resources available for product creation and production.
Things to think about when writing a reseller agreement
There are significant legal effects on both sides of a reseller deal. What happens when either party doesn’t keep their end of the deal will determine how significant these effects are. Also, it depends on how bad the breach of contract is.
- Territory: Who has the sole right to use which parts of land? What happens if a reseller goes where someone else’s land is?
- Intellectual property: this includes things like trademarks, patents, and copyright.
- Warranty: Who is in charge if a product doesn’t work as it should?
- Pricing: How prices are set, including deals, commissions, or fees.
Payment terms include when and how to pay and any fees or fines that the parent company may charge for missed or late payments.
In this case, the reseller is not responsible for any unplanned bad things that happen because of using or selling the goods.
Indemnification means that if two businesses go to court, they must pay each other’s fees.
Termination: How can either side get out of a contract? What will happen if this happens again?
Essential Parts of a Reseller Agreement
Introduction and background: Lists the parties to the agreement and summarizes their businesses and jobs.
Recitals: Gives more information about the agreement, like why it was made and what both sides wanted to achieve.
Definitions: This section explains essential words and sentences used in the agreement.
“Appointment” means the reseller is officially allowed to sell the principal’s goods or services.
Limits on where the reseller can do business, the kinds of customers they can serve, and any clauses that say they can’t or can’t sell to other people are all part of the scope of power.
Reseller’s duties: What the reseller needs to do, like promote, meet sales goals, help customers, and follow the rules set by the leading company.
Principal’s duties: Duties of the parent business, which include giving the reseller information about the product, marketing materials, training, and support.
Pricing and payment terms: This section explains how much the product costs, how to pay, and what deals or commissions the reseller can get.
Ordering and delivery: Describes how to place orders, have those orders filled, and send goods or services to customers.
Intellectual property rights: Talks about who owns and uses intellectual property, like patents for goods or services, logos, and copyrights.
Sets rules for how private data, such as customer information, client/customer lists, and internal metrics, will be treated and kept safe.
Contract term and termination clause: This part describes how long the reseller agreement will last and how either side can end it, including any notice periods.
Indemnification: The parties may agree to hold each other harmless from specific debts, losses, or harms resulting from carrying out the agreement.
- Dispute resolution: ways to handle disagreements, such as through mediation, arbitration, or bargaining.
Governing law is where the contract is interpreted and enforced based on its laws.
Amendments: A clause that says how changes can be made to the agreement. Usually, both sides must agree in writing to the changes.
- Severability: If a court rules that some part of the agreement is invalid, the rest is still legal.
Entire agreement: A clause that says the agreement is the only thing that both parties agree on and that it replaces any other agreements or talks that happened before.
