If you decide to use a local partner to resell your SaaS software to customers outside of the countries in which you are based, you will need to have an international distribution/reseller agreement in place between yourself and each distributor/reseller.
What is a Reseller/Distributor?
A reseller is the same as a distributor. A reseller/distributor purchases the supplier’s SaaS software and services under the terms of a reseller/distribution agreement. The reseller/distributor then resells the SaaS software and services to its own local customers in the territory using its own terms and conditions (and SLA).
The SaaS supplier has no legal relationship with the reseller/distributor’s customers. Customers enter into a SaaS agreement with the reseller/distributor directly.
Is an Agent the same as a Distributor?
Agents are often confused with distributors, but there are clear legal differences. An agent is a person or company who acts on behalf of the SaaS supplier to find leads and/or assist with sales of the supplier’s SaaS software to local customers in the agent’s territory.
The agent has no legal relationship with the customer – the agent has no contract with the customer. The supplier enters into a SaaS agreement, with the customer using the supplier’s terms and conditions and SLA and the supplier is liable to the customers for issues and errors that may arise during use of the SaaS software.
Why use a Reseller/Distributor?
Most SaaS suppliers use distributors to enable them to sell their software and services to customers who would not otherwise purchase the SaaS software, due to the Supplier’s:
- lack of physical presence in the customer’s country
- lack of sales channels and contacts in the customer’s country
- inability to speak the local language
- inability to provide customer support in the local language
- inability to provide customer support within the customer’s local business hours
- terms and conditions not being written in the customer’s language, or subject to local laws and regulations
By using a distributor/reseller the above problems are resolved as the distributor sells the SaaS software directly to customers, in the local language, pursuant to local law, with local support as if the SaaS software was his own software.
Which law and language
The reseller will be selling your SaaS software to its customers using its own local terms and conditions. These will probably be subject to local law i.e. French law if the reseller is located in France and in the local language, French. However, there is no reason why your reseller agreement should be in French and subject to French law, as you the supplier have no relationship with customers. You should resist any attempt by the reseller to use its local law and language in the reseller/distributor agreement. English law and English language are often accepted and used for international reseller agreements.
As a compromise, it is worth allowing the reseller to have the reseller agreement translated into their local language “for convenience”, in parallel to the English version. However if you have two language versions ensure that the English version of the agreement prevails if there are any discrepancies between the two different language versions.
In some countries it is mandatory under local law to have the agreement in the local language.
Application of Local Law
When deciding to use a reseller/distributor located outside of the UK, you will need to consider the application of any local laws applicable to the reseller/distributor agreement. For example:
- the terms of the agreement itself will be subject to local anti-competitive laws and regulations;
- in Canada withholding tax and local income taxes could apply;
- in the UAE the agreement may be registerable granting the reseller/distributor exclusive rights, rights to commission for any sales in the territory and wide reaching rights to avoid termination of the agreement.
In light of the above it is advisable to obtain expert legal advice before entering into an international reseller/distributor agreement to ensure that your legal and commercial interests are adequately protected.
Irene Bodle is an IT lawyer specialising in SaaS agreements with over 10 years experience in the IT sector. If you require assistance with any SaaS, ASP, software on demand contracts or any other IT legal issues contact me:
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