The ins and outs of a Reseller Agreement

Written by GLG Legal

GLG Legal is a leading boutique law firm based in Milton, Brisbane Queensland - Our well-established firm boast a range of high profile clients and has developed a reputation for excellence in service and solutions.

05/01/2021

As a wholesaler or manufacturer, you likely need to engage another business to sell your goods. You may have heard of these arrangements being referred to as a supply or distribution agreement before.

A reseller agreement involves engaging a business to resell your goods to the general public or other third parties. Generally, resellers do not purchase the stock from the wholesaler and will take a percentage from any sales that they make.

The supplier in these agreements needs to ensure that their rights and interests are protected, while the reseller will need to be aware of their obligations and what they are agreeing to when signing the contract. It is also important that you distinguish between an agency agreement and a reseller agreement in the contract.

WHAT TO INCLUDE IN A RESELLER AGREEMENT

Below are some common clauses that you should include in your agreement and should be tailored to your specific good or service.

  • Pricing– you should include the recommended minimum retail price for your goods
  • Term – how long the agreement is going to go for, and will there be an option to renew?
  • Orders – Does the reseller need to place an order with you or is it a periodic delivery?
  • Delivery – how and in what increments will the goods be delivered to the reseller and who will be at risk?
  • Marketing – will you require the reseller to market and advertise your goods?
  • Intellectual Property – whether the reseller is permitted to use your intellectual property, such as trade marks, advertising and marketing material. You probably will want to grant the reseller a license to use trade marks and other marketing material in order to promote your brand. It is essential that you do not assign intellectual property rights to the other party. You can also include in the agreement the ways in which the reseller can use your intellectual property. We recommend obtaining legal advice on this area of a reseller agreement in particular in order to protect your business’ assets.
  • Territory – is there a specific area in which the reseller is allowed to sell the goods?
  • Exclusivity – whether the agreement is exclusive, or the supplier is permitted to appoint other resellers within the agreed territory.
  • Termination – under what circumstances are the supplier or reseller able to terminate the agreement?

There are numerous other clauses that should be included and can be tailored to your business, which a legal professional can assist you with.

WHAT IS AN AGENCY AGREEMENT?

An agency arrangement involves an agent and a principal, where the agent (the seller of the goods on your behalf) will have to authority to act on behalf of the principal (the owner of the goods). The agent has the ability to enter into contracts on behalf of the principal, and it usually is an exclusive agreement meaning a principal will only have one agent.

In regard to a reseller agreement, the contract is between you and the reseller only and you will not usually be bound by the actions of the reseller. There is therefore separation between you and the customer, and suppliers will often have multiple resellers.  It is for these reasons that it is important you seek legal advice to ensure that the agreement does amount to that of a reseller agreement.

CONCLUSION

Whether you are a wholesaler or are a business looking to enter into a reseller agreement, it is important to firstly obtain legal advice. This will ensure that as a supplier your rights and interests are protected and as the reseller, you are aware of all of your rights and obligations under the agreement. Obtaining professional advice will also ensure that your agreement does in fact amount to that of a reseller agreement.

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