Reseller Agreement

Author: Zeinab Farhat, Progressive Legal

A reseller agreement is a popular commercial document used in different industries. If you are a reseller or supplier, it is likely that you will encounter a reseller agreement during the course of conducting business.

On this page, we’ll consider what a reseller agreement is, common clauses in reseller agreements and problems arising in reseller agreement arrangement.

What is a reseller agreement? 

A reseller agreement is a contract in which one party permits another (the Reseller) to sell, distribute and or market a product of another party (the Supplier).  

In most cases, the Supplier will be the actual manufacturer of the goods. However, the Supplier may also be a developer, importer, or licensee of a product. 

Characteristics of a reseller 

Some key characteristics of a Reseller include that they: 

1. do not purchase the stock of the supplier;  
2. take a portion of sales they make;  
3. find buyers who are interested in purchasing the products; and  
4. do not actually hold the stock of the supplier.  

Common clauses in reseller agreements 

As with most contracts, reseller agreements can differ in complexity depending on the nature of the transaction. 

In most reseller agreements, the following clauses will be used: 

1. Delivery: it is important to consider how the goods and/ or services are to be delivered, including the distribution of risk in relation to the delivery of the products. 
2. Payment: this will cover how the Reseller will pay the Supplier for the goods and/ or Services.  
3. Term: this considers the length of time for which the agreement will run and whether or not it will renew.  
4. Termination: this will cover how the agreement is to be terminated, including any applicable notice periods.  
5. Intellectual property: if there are licences involved, this may cover how the Reseller is to use the Suppliers intellectual property (in most cases, this will relate to trademarks and copyright).  
6. Territory: this will cover the location in which the Reseller can actually distribute the goods and/ or Services.  

Problems arising in reseller agreement arrangements  

A reseller agreement vs an agency agreement  

Reseller agreements differ from agency agreements, however, there can be confusion in this regard.  

Put simply, an agency agreement is an agreement between a principal (such as the owner of the goods) and the agent (the person or business which is selling the goods on the principal’s behalf).  

It is important to be mindful of the distinction between a Reseller and a principal v agent arrangement, as an agency relationship is closer than a Supplier and Reseller. In agency arrangements, the agent has obligations to act in the principals’ best interests. 

Further, in an agency arrangement, the agent may be able to enter into a binding contract with a third party on behalf of the principal. However, reseller agreements do not allow Resellers to do this. Rather, it is important that the agreement is precisely drafted to ensure that an agency relationship does not arise.  

When a reseller agreement is properly drafted, it may provide parties with more legal protection by preventing the existence of a fiduciary relationship being read into the contract. As such, having an experienced lawyer prepare the agreement is essential to ensure that the rights and responsibilities of each party are properly documented.  

Key Takeaways  

Understanding reseller agreements is essential if you are a wholesaler or business which is considering entering into such an agreement.

It is vital that you obtain legal advice prior to executing such a document whether you are the Supplier, or the Reseller. This is particularly pertinent to ensure that the agreement is a reseller agreement, and not actually an agency agreement.  

Our experienced commercial lawyers can draft an effective reseller agreement for you. Make an enquiry below or contact our office on 1800 820 083.

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