What is a software reseller agreement?
A software reseller agreement outlines the rights and responsibilities between a supplier and reseller to resell software products, along with any additional features or support services.
The reseller is a company that resells a supplier's software to customers. In most cases, the supplier will often be the owner and/or developer of the software. Once a software reseller agreement is signed by both parties, the reseller will enter into a separate supply agreement with the end-customer to resell the supplier’s software.
Although the reseller will enter into its own separate supply agreement, the owner of the software may require the reseller to ensure that the end-customer complies with its End-User Licence Agreement (EULA).
Why use a software reseller agreement template?
A well-drafted software reseller agreement safeguards your business. It allows suppliers to expand sales reach without the need for physical presence or local insights in uncharted territories. By leveraging a reseller’s established sales channels, suppliers can tap into increased revenue streams without the resource-intensive process of setting up a physical presence in a new location.
A software reseller agreement can also help resellers increase profits by reselling software through their established sales channels without the need to develop the software themselves. This relationship can amplify business potential while mitigating risks and costs typically associated with market expansion.
What are the benefits of using Docue's reseller agreement template?
For customers to purchase supplementary services: As the name suggests, VARs may offer their own additional features or support to supplement the software. They may provide additional services such as combining the software with their own products, installation, maintenance and support. With this software reseller agreement, it is possible to include additional terms if the reseller will offer additional value beyond just selling the software. This can increase the reseller's profit and enhance the customer's experience with the software.
To market the products and protect your interests: A company’s ability to sell its products and services will often be instrumental to its success. Appointing a reseller to resell software can help to increase sales and build a supplier’s customer base through new channels. This type of arrangement can be advantageous for both a supplier and a reseller to profit from the software and reduce risks on both sides.
To reach new markets: Resellers will often already have knowledge of their target market and have access to established sales channels to resell the products. A reseller can enhance a supplier’s reach to new customers without the need for local market knowledge in the territory. This will be more cost-effective for a supplier as it will not need to incur the costs of building a physical presence in the territory, such as incorporating a new entity and hiring employees.
To protect confidential information and intellectual property: An organisation's intellectual property (IP) is often one of its most valuable assets. It is important to ensure that both parties’ IP and confidential information is protected when entering into a contractual relationship. A software reseller agreement can ensure both parties’ existing IP is protected and also set out if the parties can use each other’s IP to resell the software.
Cost-efficiency: Value-added resellers (VARs) often can negotiate better pricing with suppliers due to their volume of business. Subsequently, the resellers can pass on these cost savings to customers. As a result, customers may prefer to deal with a VAR rather than the software owner to save costs.
What are the key terms that this software reseller agreement template includes?
Key clauses: This software reseller agreement template contains key provisions in relation to:
- where the reseller can resell the products;
- if the arrangement will be non-exclusive, exclusive or if the reseller will have sole rights;
- restrictions and obligations on the reseller;
- obligations of the company;
- support obligations (if applicable);
- fees and payment terms;
- the protection and rights to use IP and confidential information;
- confidentiality obligations;
- anti-bribery; and
- governing law and jurisdiction.
Exclusivity: This software reseller agreement template contains three different types of appointment rights that can be selected through the optional clauses:
1. Non-exclusive - appointing a reseller on this basis gives the supplier the most freedom as the supplier can continue to appoint other resellers to resell the products in the territory.
2. Sole rights - this is less restrictive on the supplier than non-exclusive rights as the supplier cannot appoint any other resellers. However, the supplier can still sell products in the reseller’s territory.
3. Exclusive - this is typically the most favourable type of appointment for the reseller as the supplier cannot appoint any other resellers in the territory, nor can it sell the products directly to customers in the territory.
This software reseller agreement template can be used for B2B arrangements between a supplier and reseller, where both companies are incorporated in the UK. Please note, this template assumes English law applies.
UK Competition Laws
There are certain laws in the UK that make it illegal for businesses to behave in a way that could limit competition and trade. The Competition Act 1998 prohibits agreements and arrangements between businesses that restrict competition in the UK (unless they meet the conditions for an exemption, see VABEO below). These laws are policed by the Competition Markets Authority (CMA).
The consequences of failing to comply with UK competition law can have significant implications for a business and its directors, for example:
- The agreement can be deemed unenforceable.
- Fines of up to 10% of the company's global turnover for the previous financial year.
- Personal liability for company directors, such as criminal prosecution and/or disqualification.
Some examples of anti-competitive behaviour include:
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Price-fixing: this is an agreement between two or more companies to fix prices, which can lead to consumers paying more for goods or services. Instead, recommended or maximum prices can be agreed upon, provided that it does not actually lead to fixed unit pricing.
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Market sharing: this is an agreement between companies to divide up the market and not compete with each other in certain areas or with certain customers, which can limit consumer choice and lead to higher prices.
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Bid-rigging: this is an agreement between companies to coordinate their bids for a contract, which can result in higher prices and less competition.
What is The Competition Act 1998 (Vertical Agreements Block Exemption Order) 2022 (VABEO)?
The VABEO is a set of rules that regulate certain types of agreements between businesses operating at different levels of the supply chain in the UK (such as software reseller agreements). The VABEO provides an automatic block exemption from certain competition laws in the UK on the basis that certain conditions are met, such as:
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Market share: each party's market share must be below 30%; and
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Hardcore restrictions: the agreement must not contain "hardcore restrictions" (e.g. price fixing, etc.).
This means that under VABEO an agreement between a supplier and a reseller may be exempt from certain provisions of UK competition law if it meets the relevant criteria and does not harm competition.
The VABEO also includes certain mandatory obligations that must be carried out, such as an obligation to provide any information requested by the CMA. It's important for businesses to understand and comply with VABEO if they are involved in vertical agreements. For more information, check out the CMA's VABEO guidance.
Jurisdiction of UK Competition Laws
Since Brexit, the UK now has its own system for governing vertical agreements such as distribution or reseller agreements. Although the UK’s VABEO has taken an approach that is similar to the EU Vertical Block Exemption Regulation, there are notable differences between the two regulations. As the EU and UK have separate regimes for governing vertical agreements, this template is drafted in compliance with UK rules and does not consider any other jurisdiction’s competition laws. Therefore, if this template is used in another jurisdiction, it may not be compliant with the laws of that jurisdiction.
Docue gives you options to tailor this software reseller agreement template to meet your needs
Customised for your business: This software reseller agreement template contains alternate clauses depending on whether you are the owner/developer of the software (known as the company) or the reseller.
Pro-reseller terms: In the pro-reseller optional terms, you have the option to select terms that are more favourable for the reseller. Choosing the pro-reseller terms in the template will help you steer clear of limiting the ways in which the reseller can market and resell the products.
Pro-supplier terms: Alternatively, if you choose the pro-supplier/software owner optional terms, the supplier is able to choose how strict or relaxed the obligations of the parties will be and also include a minimum quantity of products that must be purchased by the reseller. A list of “reserved customers” can also be included to allow the supplier to sell the products to certain customers in the territory even where the reseller has exclusive rights (this is known as shared exclusivity under the VABEO).
Other relevant templates
If the reseller will be reselling the software to businesses:
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The software as a service agreement may be appropriate to agree to the resale terms with business customers. If the software is being accessed from the supplier’s systems (or via a cloud-based platform).
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If the business customer will access the software via the customer’s own system the software licence agreement template would generally be more appropriate.
When should a EULA be used: In addition to using a SaaS agreement with a business customer, software owners often ask resellers to ensure end-users to agree to an EULA. A EULA is a contract between the owner and the end-user that outlines the terms and conditions for using the software.
When should the distribution agreement be used: If the products being resold consist of goods rather than software, the template distribution agreement would generally be more appropriate. Our template can be found here.
Why Docue?
Simplicity: Docue is easy to use and can help you create a high-quality reseller agreement template without the usual hefty legal bill.
E-sign and storage: Signatures can be collected electronically, and all contracts you make are saved in your company's own secure document storage vault.
Transparent pricing: At Docue, we believe in transparent and cost-effective pricing without any hidden fees buried in the fine print.
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