Software resale contracts provide a framework for collaboration between businesses to reach a mutual common goal. However, crafting a comprehensive and effective software resale contract requires careful consideration to ensure it protects your business interests.
In this blog, our legal experts delve into their top 7 key tips to help business owners create effective reseller agreements that safeguard their company and set the foundation for a mutually beneficial partnership.
1. Understand your business objectives
Before diving into the details of the reseller agreement, take a step back and clearly outline your business objectives. It’s important to consider the goals that you wish to achieve through this collaboration. Once you have defined your objectives, you can now ensure that the terms of your software resale contract align with your business goals. By understanding your business objectives, this will help you tailor the agreement to your specific requirements.
2. Define roles and responsibilities
When it comes to reselling software, each party needs to have a clear understanding of its roles and responsibilities. Your software resale contract should clearly define the roles and responsibilities of both parties involved in the reseller agreement. Outline the duties of the software owner and the reseller, as well as the expectations from each party. This clarity will help avoid misunderstandings and potential conflicts in the future.
3. Establish pricing and payment terms
Agree on the fee structure and payment terms up front to ensure both parties are clear on compensation from the outset. It is crucial that your software resale contract includes explicit and well-defined payment terms. This clause will help to facilitate smooth transactions and reduce potential risks arising from non-payment despite the reseller carrying out their obligations.
By clearly outlining the agreed payment schedule, pricing structure, deadlines and methods of payment, both parties gain a transparent understanding of their financial responsibilities. The software resale contract should also clearly outline any incentives that the reseller may be entitled to for achieving certain sales targets throughout the relationship.
Comprehensive payment terms enable effective cash flow management and revenue forecasting, which is key in a fast-paced industry such as the software industry.
Outline the payment schedule, pricing structure, and any incentives for achieving sales targets. Additionally, address how and when the reseller will be compensated for their efforts.
4. Ensuring the end customer agrees to the software owner’s product terms
If required by the owner of the software, its essential to ensure that the software resale contract includes an obligation on the reseller to ensure their end customers agree to the software owner’s terms and conditions.
For example, let’s imagine a software company allows a reseller to sell its proprietary software to end customers. To ensure that the end customers abide by the software owner’s rules when it comes to the software, the reseller needs to ensure that its contract with its end customers includes a term that requires the end customers to clearly agree to follow the software owner's rules and conditions.
This practice is common among industry giants like Microsoft, Atlassian, AWS and many others. By securing explicit acceptance of the product terms and conditions from end customers, the software owner can safeguard its intellectual property, establishes usage guidelines, and offer any SLAs or warranties while also protecting against potential misuse or liability.
5. Outline sales targets
Set clear sales and performance targets for the reseller to achieve. Your software resale contract should define the metrics that constitute successful performance and how it will be measured. This will help keep both parties focused on achieving the mutually agreed-upon goals.
If you’re the software owner, setting a minimum sales target offers reassurance that the reseller is committed to marketing and reselling the software. It acts as a tool to forecast revenue for your business whilst also providing grounds for reevaluation or termination of the contract if the minimum sales threshold is not met.
Although a minimum sales target is a pro-supplier term, for the reseller, well-defined sales targets may also provide clear performance expectations, incentivising the reseller to actively promote and resell the software to achieve the agreed goals. This, in turn, helps to maximise the software's market presence and revenue potential.
By incorporating a minimum sales target, the software resale agreement becomes a proactive tool for driving business success and accountability, ultimately benefiting both parties to the software resale contract.
6. Address termination and renewal
Incorporate termination clauses that outline the conditions under which the agreement can be terminated by either party, offering both the reseller and the software owner the opportunity to exit the software resale contract early in certain events. For example, common termination events include breaches of contract, insolvency, or a change of control of one of the parties.
As the Vertical Agreements Block Exemption (VABEO) provides certain exemptions from competition law rules for specific types of vertical agreements, including software resale contracts, under certain conditions, the supplier may wish to include a right to terminate the agreement immediately. This is because if the block exemption provided by VABEO is cancelled, it can impact the legality and enforceability of the software resale contract. For more information about competition law and the VABEO, click here.
A carefully written termination clause should reflect the parties' interests, providing certainty and predictability in the event of unforeseen circumstances.
Additionally, consider including automatic renewal terms to extend the agreement and prevent the need for further time and resources to renegotiate the software resale contract if both parties wish to continue the partnership.
7. Include confidentiality terms
Take proactive measures to protect sensitive business information and intellectual property by including confidentiality obligations in your software resale contracts.
These clauses ensure that both parties keep each other’s proprietary and confidential information a secret. By clearly outlining the scope and obligations related to confidential data, such as trade secrets, customer information, and proprietary technology, these clauses help prevent this information from falling into the wrong hands.
For a more in-depth dive into resale contracts, check out this comprehensive guide.
Why use Docue to create your own software resale contracts?
Simple: Crafting a tailored software resale contract for your business has never been this straightforward. Docue's user-friendly platform allows you to effortlessly generate your contract by answering a series of simple questions. Leave behind any worries about legal jargon – our helpful information boxes will guide you through the process.
Organised: Our high-tech platform brings organisation to the chaos of traditional contract management. Everything you need, from contract creation to e-signing and storage, is conveniently centralised in one place. No more hunting through files or emails – our secure storage vault ensures your contracts are safely stored, ensuring you never lose important documents again.
Transparent fees: At Docue, we believe in clear and cost-effective pricing. Our price tiers are designed to suit your business, providing you with clear visibility of all costs involved. No hidden fees or surprises – just a cost-effective solution for all your software resale contract needs.
Tags: software sale contract, reselling software, software owner, sales targets, performance metrics, minimum sales target, competition law, Vertical Agreements Block Exemption (VABEO)
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