Key Takeaways

  • A reseller agreement outlines terms between a vendor and reseller, clarifying responsibilities, pricing, territory, and IP rights.
  • There are several types of reseller agreements, including exclusive, non-exclusive, and white-label arrangements.
  • The agreement should detail performance benchmarks, termination rights, and dispute resolution methods.
  • Legal considerations such as indemnification, compliance, and liability limitations are critical to reduce risk.
  • Customization is key—agreements should align with your business model, product type, and reseller structure.

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. 

Types of Reseller Agreements

Not all reseller agreements are structured the same. Understanding the different types helps vendors and resellers define their roles and responsibilities more clearly.

Common types include:

  • Exclusive Reseller Agreement: Grants a single reseller the exclusive rights to sell a product in a specific territory or market segment. This provides incentive for commitment but can limit market reach.
  • Non-Exclusive Reseller Agreement: Allows multiple resellers to sell the same product. This expands the market but may increase competition between resellers.
  • White-Label Reseller Agreement: Permits the reseller to rebrand and sell the vendor’s product as their own. This is common in software or digital services and requires specific clauses about branding and support responsibilities.
  • Value-Added Reseller (VAR) Agreement: Allows the reseller to enhance the product with additional features or services. These agreements should clarify ownership of modifications and support obligations.

Choosing the right structure depends on your sales strategy, desired market control, and product customization needs.

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. 

Common Challenges in SaaS Reseller Models

SaaS reseller agreements come with unique challenges beyond traditional product reselling due to the subscription nature and need for ongoing support. Common pain points include:

  • Customer Ownership: Clearly state whether the vendor or reseller owns the customer relationship, particularly for renewals and upsells.
  • Data Access and Control: Resellers often need limited access to customer data for support but must adhere to privacy laws and data security practices.
  • Pricing Flexibility: Define if and how a reseller can offer discounts or bundled services. Without limits, this can erode margins or brand equity.
  • Support Obligations: Clearly define who handles first-line vs. second-line support to avoid service gaps.
  • Renewals and Billing: Outline whether the vendor or reseller handles billing and renewals to avoid confusion or revenue leakage.

Carefully drafting terms around these issues ensures smoother operations and client satisfaction.

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. 

Reseller agreements often operate across state or even national boundaries, making legal clarity crucial. Key legal aspects to include are:

  • Compliance Clauses: Require resellers to adhere to all applicable laws, including export restrictions, consumer protection rules, and antitrust regulations.
  • Intellectual Property Protections: Protect trademarks, patents, and software with explicit IP clauses, especially in white-label arrangements.
  • Limitation of Liability: Limit the vendor's liability for indirect or consequential damages to prevent excessive legal exposure.
  • Governing Law and Jurisdiction: Specify which state or country’s laws govern the agreement and where disputes will be resolved.
  • Audit Rights: Allow the vendor to audit reseller compliance, particularly for financial and regulatory obligations.

Incorporating these provisions helps prevent legal disputes and protects your brand integrity and assets.

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

Performance Metrics and Termination Rights

A well-structured reseller agreement should include enforceable performance metrics and fair termination clauses. These ensure alignment with your business objectives and provide exit options if expectations aren’t met.

Consider including:

  • Sales Targets: Set realistic but measurable performance goals tied to volume or revenue.
  • Periodic Reviews: Schedule formal evaluations to assess reseller performance.
  • Termination for Cause: Outline breaches (e.g., missed targets, misuse of IP) that permit immediate termination.
  • Termination for Convenience: Allow either party to end the agreement with notice, maintaining flexibility.
  • Post-Termination Clauses: Specify how outstanding payments, product returns, and ongoing customer obligations will be handled.

These provisions help prevent long-term issues and promote accountability.

Frequently Asked Questions

1. What is a reseller agreement? A reseller agreement is a legal contract that outlines the terms under which a reseller can market and sell a vendor’s products or services.

2. What’s the difference between a reseller and a distributor? Distributors typically buy and stock inventory, while resellers may sell directly to customers without holding stock, often operating as intermediaries.

3. Can a reseller agreement be exclusive? Yes. Some agreements grant exclusivity to a reseller within a certain region or market, while others allow multiple resellers.

4. What are the key risks in a reseller agreement? Risks include unclear customer ownership, pricing conflicts, legal liabilities, and inadequate support or brand representation.

5. Do I need a lawyer to draft a reseller agreement? It’s highly recommended to consult a lawyer to ensure legal compliance, protect your IP, and avoid potential disputes. You can find qualified attorneys on UpCounsel for assistance.

If you need help with a reseller agreement, you can post your legal need on UpCounsel's marketplace. UpCounsel accepts only the top 5 percent of lawyers to its site. Lawyers on UpCounsel come from law schools such as Harvard Law and Yale Law and average 14 years of legal experience, including work with or on behalf of companies like Google, Menlo Ventures, and Airbnb.