Reseller and Partner Agreement | US, UK and Canada

Reseller and Partner Agreement: getting your product to market through someone else

You have spent time and money building a product. A Value Added Reseller (VAR) takes the stress of selling it away: combining it with their own products or services and selling it on to their customer base.

The VAR is your middleman. They free you from the burden of sales and marketing so you can keep building. The Reseller and Partner Agreement (R&P) is what makes that relationship work on terms you control.

Who needs one

ISVs and software vendors building an indirect channel
SaaS providers selling through MSPs and IT resellers
Product companies appointing distributors in new markets
Anyone whose product is being sold by someone whose sales staff they have never met

The clauses that matter most

1. The appointment

Start simple. You appoint the VAR as your non-exclusive distributor: they can sell your product and also work with other vendors.

But there are limits. They may not buy your product from anyone other than you. They may not sell a product that is similar to or competes with yours. They are not part of your company, so they cannot make promises, warranties or guarantees on your behalf. And they may not sell your product on to another reseller. Otherwise, what was the point of appointing them?

Jurisdiction note: the franchise trap

This catches more software vendors than any other issue on this page. A "reseller" or "partner" arrangement can fall within franchise legislation if it combines three elements: use of your trademark or brand, a degree of control or assistance over how the partner operates, and a required payment (a partner fee, minimum purchase, or training charge).

US: The FTC Franchise Rule requires a Franchise Disclosure Document to be given at least 14 days before signing or payment, and around a dozen states have their own registration and disclosure regimes. Several more have separate business opportunity statutes with lower thresholds. Getting this wrong can make the agreement rescindable.

Canada: Six provinces have franchise legislation, including Ontario's Arthur Wishart Act, which requires a disclosure document 14 days before signing or payment and imposes a statutory duty of fair dealing. Failure to disclose properly gives the franchisee a rescission right, in some cases for up to two years.

UK: No franchise-specific statute, so the risk here is lower. But watch the Commercial Agents (Council Directive) Regulations 1993: if your partner is an agent negotiating sales on your behalf, rather than a reseller buying and reselling in its own name, the regulations can entitle them to compensation or an indemnity when the agreement ends, irrespective of what your termination clause says. The distinction between agent and reseller is therefore worth getting right on paper and in practice.

None of this means you cannot run a channel. It means the fee structure, the level of control you exercise, and how the relationship is described all deserve a legal read before you scale it.

2. VAR responsibilities

Your product is leaving your hands. You want it promoted, sold and distributed to your standards.

The R&P should bind the VAR to sell in accordance with instructions you may impose from time to time, and to use either commercially reasonable or best endeavours to sell. Best endeavours is the stricter obligation. Worth considering whether it is fair if the VAR carries other vendors' products too.

Your EULA is critical here. The R&P should compel the VAR not to amend it, and to make customers aware of and accept its terms.

The VAR must also keep books and records of your product, essential when you come to audit, and employ skilled, trained sales staff.

3. Your responsibilities

Simply put: provide the product. That includes updates and the latest versions. Where the VAR requests additional or replacement copies, provide those too, though whether you charge extra is your call.

You keep the right to change the order form, EULA or specification at any time. If you offer support services, you provide them when reasonably requested.

4. Payment terms

The VAR complies with the payment terms you set out in the schedules or order form. You should keep the right to change your prices, specifying how much notice the VAR gets.

Jurisdiction note: do not dictate the resale price

Setting the price your reseller charges its own customers is resale price maintenance, and it is a competition law issue in all three jurisdictions. You can set the price you charge the VAR, and you can publish a recommended resale price. But requiring a minimum resale price is a different thing.

UK: Potentially an infringement of the Chapter I prohibition under the Competition Act 1998; the CMA has fined suppliers in several sectors for exactly this.

Canada: Price maintenance is reviewable conduct under the Competition Act, with a private right of access to the Competition Tribunal.

US: Since Leegin (2007) minimum RPM is assessed under the rule of reason federally, but several states, including California and Maryland, treat it far more strictly under their own antitrust laws.

Extra costs, expenses and charges the VAR incurs are theirs, unless you have expressly agreed in writing to cover them. Invoices are issued annually. Payment within 30 days of invoice date is the usual standard, with interest at a rate you choose on anything later.

Jurisdiction note: interest and tax

UK: 30 days matches the Prompt Payment Code; the statutory fallback absent a contractual rate is 8% above the Bank of England base rate. Fees exclude VAT.

US: Interest is contractual, subject to state usury caps; there is no general federal prompt payment rule for private contracts. Fees exclude state and local sales tax.

Canada: Express the rate annually, or s.4 of the Interest Act caps it at 5% per annum. Fees exclude GST/HST, and QST in Quebec.

5. Marketing

You need to retain control of how your product is presented. The VAR takes on marketing responsibility, but must follow your directions on the product, logos, branding and trademarks, and must market in a way that promotes the goodwill and reputation of your company. Marketing that damages your reputation is a breach of contract.

6. Laws and regulations

An obligation on the VAR to comply with relevant laws and regulations is useful when you need to suspend the product temporarily to make it compliant. The VAR is responsible for import licences and fees when selling abroad, and must follow any mandatory policies you set out in the schedules.

7. Intellectual property

Your product is your most valuable asset. The R&P should state that you own all IP rights in it, and that you are granting the VAR a licence to use and copy the product only for the purposes of the agreement.

The VAR may not needlessly copy, modify, adapt, decompile or reverse engineer the product, or transfer the licence to anyone else. If a third party challenges your IP rights, the VAR must notify you immediately.

8. Confidentiality

Both parties will disclose confidential information: trade secrets, designs, know-how, plans, strategies. The agreement binds each to protect the other's and to use it only for performing the agreement. Confidentiality continues after termination.

9. Liability

Neither party should be liable to the other for loss of profit, revenue, goodwill or anticipated savings. Set a financial cap, for example liability not exceeding total fees over the past 12 months.

One warning: a cap the courts consider unreasonably low can be void, which would leave your liability unlimited. Set it at a figure that is genuinely defensible.

Jurisdiction note: will the cap hold?

UK: Exclusion and limitation clauses in B2B contracts are tested for reasonableness under the Unfair Contract Terms Act 1977. A cap set at a token figure relative to the contract value is the classic way to fail that test.

US: Enforceability turns on unconscionability and, for goods, UCC §2-719, under which a limited remedy that "fails of its essential purpose" can be struck. Some states also restrict the exclusion of consequential damages in particular contexts.

Canada: Since Tercon Investments v British Columbia (2010 SCC 4), the analysis asks whether the clause applies on its terms, whether it was unconscionable when made, and whether an overriding public policy reason justifies refusing to enforce it. The old doctrine of fundamental breach no longer applies.

10. Termination

The initial term is your choice, and the agreement rolls on for successive periods of the same length. A 90-day initial term auto-renews every 90 days. The most common structure is a one-year initial term with 90 days' notice to cancel the renewal: long enough for both sides to establish the relationship, and enough notice to prepare for an exit.

The right to terminate for convenience should be yours alone. You should also be able to terminate if the VAR:

fails to comply with your policies
undergoes a change of control
assigns any of its rights or obligations under the contract
has customers who violate your product's EULA

Either party can terminate for a material or payment breach not remedied within a period you choose: 14 to 30 days is typical. Other triggers include a company ceasing or suspending a significant proportion of its business.

Frequently asked questions

What is the difference between a reseller agreement and a referral agreement? A reseller sells your product to their own customers and owns that customer relationship. A referrer only makes an introduction and takes a commission if a deal follows.

Should the appointment be exclusive? Non-exclusive is the safer default. Exclusivity means betting your market on one partner's performance.

Can the VAR change my EULA? No. The agreement should expressly prohibit it and require them to put your EULA in front of every customer.

What if a reseller's customer breaches my EULA? That should be one of your termination triggers, alongside failure to follow your policies and change of control.

Could my reseller agreement be a franchise? Possibly. If it combines your brand, a degree of control over how the partner operates, and a required fee, it can fall within the FTC Franchise Rule in the US or provincial franchise legislation in Canada, both of which require a disclosure document before signing. Worth a legal read before you scale the channel.

Can I set the price my reseller charges? You can set your price to them and recommend a resale price. Requiring a minimum resale price raises competition law issues in all three jurisdictions.

How Cloud Contracts 365 helps

Cloud Contracts 365 builds your Reseller and Partner Agreement from a guided questionnaire and keeps the whole channel in one place: every VAR, every signed agreement, every renewal date and notice window. Add a partner in minutes rather than reaching for the last one you sent and hoping it was the current version.