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When you’re deciding how to operate your business, it is important to think about the most efficient way to get your products to your customers that suits your unique situation. You may find that your products already have a strong brand presence, but you want to expand that even further. Or, you want to outsource the marketing and distribution of your product as your business grows. Depending on your situation, it may be worthwhile to consider the option of engaging a reseller. A reseller is someone who purchases your products from you and then sells them to other third parties and customers. It is crucial to define your legal relationship with your reseller in a reseller agreement. This article will outline some key clauses to include in your reseller agreement.

Terms of Payment

One term you must include is one defining the financial aspect of your relationship with your reseller. You can structure your payment terms any way that you want. However, it is important to make sure they are clearly defined, and both you and your reseller understand the structure. This way, you can take all steps to make sure you are protected against any unnecessary financial risk. Some payment issues to consider include:

  • whether the prices of your product can change from time to time. Depending on the cost of resources for creating your goods, you may need to alter your price if anything changes;
  • determining how you calculate the reseller’s fee (or portion of the profits), and when the reseller can claim this fee;
  • how the reseller pays you for your product. For example, this can occur through an upfront deposit and the rest is paid once the goods are delivered;
  • charging interest on any late or unpaid goods; or
  • fees for late invoices.

Orders

You should include a couple of clauses detailing how the reseller’s ordering process will function. This includes determining how the reseller makes purchase orders, and when. You could also cover a number of other terms:

Term

Description

Minimum Order Requirements

You may want to have as part of your agreement that the reseller needs to order a particular volume or value of stock each month. This increases the efficiency of your contract and means that your product is getting more brand exposure. You can also adjust this minimum as you need.

Right to reject an order

The reseller has the right to accept or reject an order at your discretion where reasonable. There may be some periods where you cannot fulfil orders, for example, if your stock is scarce. It is important to outline this in the agreement if that could be a potential problem.

It is important to note that you cannot determine what price the reseller resells your product at. You can give them recommendations, but if you try to force them to sell at a set price, that is against the law.

Branding

If the reseller is using your branding or intellectual property in any way, it may be worthwhile to include a term in your agreement that covers how they can use that branding.

For example, saying they cannot use certain words or phrases when marketing with your brand. This way, you can avoid any adverse effects on your business reputation, and protect your intellectual property rights.

Consumer Guarantees

As a professional seller of goods and services, you have responsibilities under the governing law protecting the rights of consumers. In your reseller agreement, you should outline who is responsible for dealing with customer complaints. You cannot place customer complaints on a back-burner to be dealt with later, they have to be heard efficiently and you have to make a reasonable effort to fix their problem. If a product is faulty, customers have a right to have it repaired or replaced, and a refund if that is not possible.

If the product is faulty and that can be attributed to the actions of your business, you will be the one who has to replace it. Therefore, it is essential to understand your obligations to the customer.

Delivery and Control

You should also include some clauses outlining how the products are delivered to customers, and when legal ownership transfers to the seller. This will happen when they pay fully for the stock, but if they are paying in instalments, then this may be more difficult to determine. This will also determine who is responsible for the goods if they are damaged in delivery, so if you include a clause defining when the goods pass from your responsibility to the resellers you can reduce potential risk.

Key Takeaways

Engaging a reseller to sell your goods can be a prudent business decision if it suits your circumstances. However, it is essential to draft up a comprehensive reseller agreement to protect against potential risk and clearly define your legal relationship with the reseller. If you would like more information or help with your reseller agreement, contact LegalVision’s contract lawyers on 0800 005 570 or fill out the form on this page.

What does reseller mean?

A reseller is someone who buys your product from you and then sells that product to another third party or customer. They usually will order product from you, and then that product is delivered straight to the customer. The reseller usually charges you a fee or gets a commission from the goods they sell.

How do reseller agreements work?

A reseller agreement is a contract you draft up if you engage a reseller to sell you goods onto a third party. You put in terms outlining how the reseller orders product from you, how they are paid, and who deals with faulty products, as well as other clauses.

What is the difference between a reseller and a distributor?

Both buy your goods from you and sell them onto customers. Distributors will store your product at their own warehouse and sell it from there. Whereas resellers do not store your product, and you are in charge of keeping inventory. When customers place orders, the goods are delivered straight to them.

Why would I use a reseller for my business?

You may want to use a reseller because it means that you do not have to worry about the distribution of your product, or finding customers to buy it. They may have a wider network of customers available to them, and an already established customer base to sell your product to.

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