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When you decide how to run your company, you should ensure that you use contractual agreements whenever you do business with other people. The standard to which you draft your contracts will be crucial in determining how strong your contract is. This is because parties to a contract can find loopholes around certain clauses if they have not been properly drafted. If the other party has found a loophole, the court may not be able to help you. One standard contract used in New Zealand is a reseller agreement. It is commonly used to protect business interests and contains certain clauses, such as a non-compete clause. This article will explain how to draft a non-compete clause in a New Zealand reseller agreement.

What is a Reseller Agreement?

A reseller agreement is an employment contract which allows a business to sell their goods to a person or company that will then resell them to the general public at a profit. They are a valuable strategy for businesses as it guarantees that they will have constant income from the sale of goods. The reseller agreement is a binding contract that sets out the relationship between a reseller and a business. It will also explain what rights a reseller has and what they can do with the product.

What Should You Include in Your Reseller Agreement?

Your reseller agreement should contain certain clauses that protect your company’s rights and uphold your reseller obligations. For example, you should include a termination clause in your reseller agreement. This means that either party can terminate the agreement if the circumstances meet the conditions outlined in the termination clause.

In addition, you should make sure that you address any intellectual property concerns in your reseller agreement. For example, your reseller may want to use some of your intellectual property, such as your branding, to market the product. However, copyright laws will usually prevent this from happening. Therefore, you can include an intellectual property clause that can licence your reseller to use your intellectual property for this purpose or for a specified period. An intellectual property clause also stops your reseller from using your intellectual property for any purpose other than the one you allow.

What is a Non-Compete Clause?

A non-compete clause is a common term used in many employment contracts. It prevents your contracting party from doing business. You can use non-compete clauses to ensure that your reseller can only buy from your company and not from any competing businesses.

How Do You Draft a Non-Compete Clause?

Terms of the Clause

To draft a foolproof non-compete clause, you should make sure the terms of the clause are unambiguous. This means that you should specifically name the parties involved and who exactly your reseller cannot do business with. Your clause should also state that you can clear up any ambiguities through discussions with the contracting party.

Scope of the Clause

You must also make sure that you have correctly defined the scope of the clause in order to protect your business interests. It is common for reseller agreements to have non-compete clauses that stop resellers from buying other products in the same industry as your business. However, they will still be able to buy and sell products from other industries. Trying to limit a reseller only to buy your products will be tough as your reseller may not survive financially if they are only selling one product.

You can also stop your reseller from poaching your clients through a non-compete clause. For example, if you have customers you sell to directly, you can state in your non-compete clause that these customers are off-limits. Furthermore, you can also stop your reseller from taking any of your staff as long as you define this correctly in your non-compete clause. This can help protect your confidential information and trade secrets.

Key Takeaways

It is common for businesses to use contracts for transactions and agreements. This is because they are legally enforceable. In addition, parties to a contract can receive compensation if the other contracting party does not fulfil their responsibilities under the contract. Resellers are businesses or individuals who buy goods from businesses to sell them at a higher price. Reseller agreements are the underlying contract between a reseller and a business. These agreements generally contain a non-compete clause in one form or another. Non-compete clauses can forbid resellers from reselling other businesses’ goods. However, they are usually only used to make sure resellers are not selling goods from competitors. Non-compete clauses can also extend to stop your reseller from taking any of your clients or staff. For legal assistance with drafting a non-compete clause or managing your contracts, contact LegalVision’s contract lawyers on 0800 005 570 or fill out the form on this page.

Frequently Asked Questions

Do I have to include a non-compete clause in my reseller agreement?

No, but it is a good idea to include one so that your reseller can focus only on selling your products.

Can I terminate a reseller agreement at any time?

No, you can only terminate your agreement if the conditions stated in your reseller agreement have been met. 

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