Software Reseller Agreement

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Software Reseller Agreement

What Is a Software Reseller Agreement?

A software reseller agreement includes the right and duties between the software owner or publisher and an individual or business organization wishing the right to sell or license the software to third parties. Software reseller agreements are also known as Software as a Service (Saas) reseller agreements. Most of the software reseller agreements are nonexclusive in nature, i.e., the owner may have a right to resell the software to third parties, but there are exclusive software reseller agreements where the owner or any other reseller is prohibited from distributing or reselling the software to certain end users. 

Who Are the Parties to a Software Reseller Agreement?

A Software reseller agreement typically contains two main parties: 

  1. The owner or publisher of the software
  2. The reseller or distributor who later enters into a contract with the third party

What Is the Purpose of a Software Reseller Agreement?

A software reseller agreement is created for the following purposes:

  • It helps the owner to expand his business to other regions/markets/territories without actually being physically present in those areas.
  • It enables the software owner to sell software services to customers. They would not otherwise purchase the services because of the owner’s physical presence, the shortage of sales channels and contacts in the customer’s country, local language issues, local laws, and regulations. But after entering into software reseller agreement, all these issues can be dealt with.

Contents of a Software Reseller Agreement

A software reseller agreement consists of the following terms and conditions: 

  • Seller v. distributor: A seller could be the owner of the software or developer.However, a distributor only helps the seller in the distribution of the software.
  • Exclusive or Non-Exclusive software reseller: The agreement should, at the beginning mention the nature of the agreement, i.e., whether it is exclusive agreement or nonexclusive agreement.
  • Payment Terms: Generally the compensation of reseller is the difference between the amount paid by a third party and the price paid by the reseller to the publisher but many a time the software reseller agreements provides for the reseller to receive sales commission based on license fees paid directly to the owner by the third party/customer. Hence the same must be clarified in the agreement. 
  • Maintenance and Software updates:  The agreement should spell out whether the owner is obligated to provide the third parties or consumer, maintenance or upgrades to the software and whether any additional fee or charge is needed for such maintenance and upgrades. 
  • Training and installation related services: The agreement must spell out whether the reseller is obligated or allowed to provide for installation and training related services.
  • Term and Termination of the agreement: The agreement must contain the time period for which the reseller has the right to resell the software. Also, the conditions may be specified when the agreement will be terminated. Some post expiry or terminated reseller agreement issues such as customer license renewals or ownership of data or other IP associated issues need to be addressed in the agreement.

[Also Read: Software Reseller and Services Agreement]

How to Draft a Software Reseller Agreement

An effective agreement can be drafted, keeping in mind the following:

  • Making clear in the agreement on how to handle late payments and assess risk if a third party doesn’t pay or become insolvent and who will take hit in these kinds of situations?
  • The agreement should clearly state out whether or not the reseller has a right to register local domain names, company names, and trademarks on behalf of the owner.
  • The agreement must clearly set out the territories where reseller may resell the software.
  • The parties must make clear in the agreement whether the reseller has exclusive or nonexclusive rights in any or all territories. 
  • Making sure that the owner is complying with the anti-competitive laws in the reseller agreement.

Benefits and Drawbacks of Software Reseller Agreement

Benefits:

  • The owner of the software may not be well-versed with the country of third parties or customers, but entering into an agreement with the reseller or distributor can help in removing this obstacle because generally reseller or distributor also belongs to the same country as that of third party hence he is well versed with the country and culture.
  • The owner has not to be physically present in the third party’s country.

Drawbacks:

  • The software supplier has no control over the working and sales process of reseller or distributor and to be specific no control over choices of third party or customers.
  • The terms and conditions of a reseller agreement are itself subjected to various local anti-competitive laws and regulations. 

What Happens in Case of Violation

In the event, a software reseller agreement is violated or the breach, the parties can demand damages for such breach or replacement of reseller or approach the courts, or they can sit together and resolve the issue by mediation, arbitration or other such alternative methods of dispute resolution. Methods of dispute resolution and the choice of law/jurisdiction should be mentioned in the agreement itself.

A software reseller agreement is an effective way to reach different markets and regions, removing all the obstacles like owner’s physical presence, the dearth of sales channels and contacts in the customer’s country, local language issues, local laws, and regulations. But sometimes the parties to the agreement indulge in anti-competitive practices, and it may lead to a very large fine and penalty based consequences. Hence parties must assure that they are complying with the anti-competition laws and local laws and regulations.

Sample for Software Reseller Agreement

A sample of the Agreement can be downloaded from below.

Download Software Reseller Agreement Template

Software Reseller Agreement

 

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