Need a reseller agreement?

A reseller agreement (Reseller Agreement) is a contract that entitles one party (Reseller) to sell, market, distribute, or lease a product or service of another (Supplier).  Resellers Agreements are also known as distribution, supply or distributor agreements. Often the Supplier is also the manufacturer of the goods but they may be the importer, a developer of the service or a licensee of software or training programs.

Common clauses in Reseller Agreements

Reseller Agreements range from simple and straightforward to complex, depending on the types of goods or services distributed and the industry the parties operate in.

Common clauses include:

  • Delivery – how are the goods or services to be delivered and how is risk apportioned?
  • Exclusivity – whether or not the Supplier may appoint other Resellers within the territory;
  • Payment Terms – the manner in which the Reseller must pay the Supplier for the goods or services;
  • Renewal – whether the agreement may be renewed or extended and if so at what cost;
  • Term – the length of time for which the agreement will run and whether or not it will renew;
  • Termination – how the agreement may be terminated;
  • Intellectual property – what, if any, licence the Reseller is granted to use the Suppliers trade marks or advertising material; and
  • Territory – the area in which the Reseller may distribute the goods or services.

Common problems with Reseller Agreements

It is important to distinguish the reseller relationship from the similar (yet distinct) relationships of:

  • principal and agent; and
  • franchisor and franchisee;

the creation of which is likely to have significant legal implications for the parties involved.  Businesses must therefore be conscious of limitations to what can be included in Reseller Agreements.

Common requests made by clients include:

  • Placing rigid processes on the Resellers. However, if they become to extensive it may alter the nature of the Agreement and turn it into a Franchise Agreement, which must then be compliant with the Franchising Code of Conduct.
  • Trying to set minimum prices for which goods or services can be sold. While it is reasonable to state recommended retail prices, resale price maintenance is illegal as it discourages competition.

Dundas Lawyers assists resellers, suppliers and manufacturers in drafting or reviewing Reseller Agreements to protect their interests in the transaction and ensure compliance into the future.  On occasion we also assist with document assembly for those looking to issue multiple contracts.

Managing reseller relationships

One of the often overlooked issues by those looking to scale their business by appointing resellers is to ensure that these relationships are appropriately managed.   It is important to carefully consider, understand contractual rights, but also to monitor the resellers actions to ensure they create transferrable value, otherwise the risk is that they attempt to go around the supplier.  Issues such as renewals and precise territories and ensuring that the clients or customers can be adequately serviced in the event of a default by a reseller also need to be considered.  Contract management can also be critical if a large based of resellers exists.

Takeaways

Drafting, amending or signing a Reseller Agreement needs careful analysis of the implications associated with change.   A poorly drafted, or inappropriately adapted, Reseller Agreement can have severe consequences for all parties involved.  There are significant risks if a template is taken from the internet and used without ensuring it complies with Australia’s regulatory environment and is suitable to your exact circumstances.

Further references

Cases

In Workplace Safety Australia v Simple OHS Solutions Pty Ltd [2015] NSWCA 84, Simple OHS Solutions Pty Ltd (Respondent), entered into a Distribution Agreement Workplace Safety Australia Ltd (Appellant), to be the exclusive Reseller of the Appellant’s subscription packages.  The Court held that the Distribution Agreement was in fact a franchise agreement within the meaning of the Franchising Code of Conduct (Code).   Because the Appellant had not complied with the requirements of the Code, it was in breach of the Competition and Consumer Act 2010 (Cth) and was required to pay the Respondent over $200,000 in damages.

Legislation

Competition and Consumer Act 2010 (Cth)

Personal Property Securities Act 2009 (Cth)

Related articles by Dundas Lawyers

Distribution agreements – an introduction

Reseller agreements – order taker or fiduciary?

 

Further information

If you need assistance drafting a Reseller Agreement, please telephone me for an obligation free and confidential discussion.

Malcolm Burrows B.Bus.,MBA.,LL.B.,LL.M.,MQLS.
Legal Practice Director
Telephone: (07) 3221 0013 | Mobile: 0419 726 535
e: mburrows@dundaslawyers.com.au

 

Disclaimer

This article contains general commentary only. You should not rely on the commentary as legal advice. Specific legal advice should be obtained to ascertain how the law applies to your particular circumstances.

Dundas Lawyers
Street Address Suite 12, Level 9, 320 Adelaide Street Brisbane QLD 4001

Tel: 07 3221 0013

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