Modern consumers have grown up with the expectation of being able to find various types of goods within the one store. Due to these onerous expectations placed on businesses, businesses will often engage with various suppliers of differing goods to be able to meet the demands of their consumers.
By engaging with a supplier of goods, the reselling business will need to be wary of the Reseller Agreement which essentially outlines their obligations in reselling the goods of the supplier. The supplier will also need to ensure their rights and interests are protected under the Reseller Agreement.
What is a Reseller Agreement?
A Reseller Agreement is best described as an agreement between the supplier of goods and the business who plans to distribute those same goods to the general public. Such agreements have become commonplace around the globe due to the commercialisation of various industries and the changes in how consumers shop.
Key features of a Reseller Agreement
Due to the nature of competition in today’s market and the emphasis on advertising, Reseller Agreements contain a lot more than just a simple clause allowing one business to resell another business’ goods. A few of these clauses include:
If you are allowing a business to resell your goods, you should consider the advertising requirements you will impose upon the reseller. For example, you may require the reseller to advertise that they sell your products during the beginning of the agreement as this will be an effective tactic to notify a new client base that your goods are available at their business.
Delivery of the goods to the reseller
You will need to consider how your goods will get from your manufacturing location to your reseller. This will vary depending on how large your company is, where your company is based, where your goods and products are created, and where the reseller is located.
This condition will usually involve when the delivery is expected to occur, whether it is a periodic delivery or if the reseller needs to order goods from you, and how the goods are to be delivered.
If you are the supplier of goods that are considered to be in a niche category and therefore, only have a few other suppliers as your competition, it may be worthwhile to consider including a clause restricting the reseller from selling the goods of your competitors or of like-products.
On the other hand, if you are a reseller you may consider adopting this clause when big name suppliers are interested in supplying their goods to you because not only would this be appealing to the big name supplier as you are removing their competition but, you are also bringing a big name supplier to your business which is likely to attract more consumers than a smaller supplier.
If you are allowing a reseller to advertise your brand and products, you will need to consider the licence associated with the reseller using your trademarks in advertising. Usually, there will be very specific provisions detailing how your intellectual property can be used and in what circumstances it can be used by the reseller.
Particularly with these provisions, we advise seeking legal advice in drafting the terms as it is vital that they are adequate in protecting your business’ intellectual property rights.
Where the reseller can sell your goods and products
If you are supplying your goods to a reseller, you will need to consider whether you will impose any restrictions on where the reseller can sell your goods. For example, if you have your own shop in the Brisbane CBD which sells your goods, it may be disadvantageous to allow another shop close by to resell those same goods.
With more consumers turning away from brick and mortar stores to online stores, you may also need to consider whether you will only allow a reseller to resell your goods online.
Does a Reseller Agreement create an Agency relationship?
An agency relationship is similar to the relationship created between a supplier and reseller in a Reseller Agreement in the sense that one party is supplying a service on behalf of another party. For example, a business is supplying the service of selling goods on behalf of the supplier.
Despite the similarities, a Reseller Agreement typically does not create an agency relationship because one of the fundamental characteristics of an agency relationship is lacking. That is, a reseller is not allowed to enter into contracts on behalf of the supplier which is typical in an agency relationship.
With that said, there may be circumstances in which the reseller will argue this and state that they are acting as an agent of your company. In these cases, the Courts will look to the substance of the relationship rather than terms contained within the Reseller Agreement.
If you find yourself in a situation where a reseller is claiming to be an agent of your company, please contact us to seek legal advice from one of our specialist commercial lawyers who will guide you through the matter.
If you are a reseller looking to enter into a Reseller Agreement or if you are a supplier looking to draft your Reseller Agreement, you must ensure that your rights and interests are protected.
We strongly advise that you seek the legal assistance from our team of experienced commercial lawyers when drafting or entering into a Reseller Agreement as we will be able to guide you through the agreement and assist you in making changes that suit your business’ needs.