Tag: distributor

SaaS Agreements – FAQs – Reseller Agreements

SaaS suppliers who decide to use a local partner to resell their SaaS software to customers outside of the countries in which they are based, will need to have a reseller/distributor agreement in place between themselves and each SaaS reseller/distributor.

What is a SaaS Reseller/Distributor?

A SaaS reseller is the same as a SaaS distributor. A reseller/distributor purchases the supplier’s SaaS software and services under the terms of a reseller/distribution agreement. The SaaS reseller/distributor then resells the SaaS software and services to its own local customers in its local territory using its own terms and conditions (and SLA).

The SaaS supplier has no legal relationship with the SaaS reseller/distributor’s customers. Customers enter into a SaaS agreement with the reseller/distributor directly.

Reasons for Using a Reseller/Distributor                                          

SaaS suppliers use resellers to facilitate sales of their SaaS software and services to customers who would not otherwise be able to 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 SaaS reseller/distributor the above problems are resolved as the SaaS reseller 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.

Advantages

The main advantage of using a SaaS reseller is that the SaaS supplier will have no liability to customers – as there is no contract or legal relationship between the customer and the SaaS supplier. For example, any implementation issues or software errors that the customer encounters when using the SaaS software will be the SaaS reseller’s problem. The distributor will be liable to the customer and will be obliged to resolve such issues directly with the customer.

Disadvantages

The main disadvantage of using a SaaS reseller is that the SaaS supplier has no control over the sales process and in particular of the choice of customers. Also, the terms of the reseller agreement itself will be subject to local anti-competitive laws and regulations.

Help

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:

irene.bodle@bodlelaw.com
www.bodlelaw.com

To register for my newsletter click here

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SaaS Agreements – Reseller/Distribution – International SaaS Reseller Agreements

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.

 Summary

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.

Help

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:

irene.bodle@bodlelaw.com
www.bodlelaw.com

To register for my newsletter click here

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SaaS Agreements – Reseller/Distribution – Terms to Include

When using a local partner to resell your SaaS software to customers outside of the countries in which you are based, you will need to have a distributor/reseller agreement in place between yourself and each distributor/reseller. This will in part mirror your standard SaaS terms and conditions but will also need to include additional clauses to cover the issues set out below.

Applicable Law and Language

Usually your reseller will be located in another country. 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. German law if the reseller is in Germany and in the local language, German. However, there is no reason why your reseller agreement should be in German and subject to German law, as you the supplier have no relationship with the customers. You should resist any attempt by the reseller to use its local law and language.

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.

Please note that in some countries it is mandatory under local law to have the agreement in the local language.

IPR

It is essential that you control the use of your name, trademarks and intellectual property rights by your resellers. You should set out clearly in the reseller agreement whether or not the reseller is permitted to register local domain names, company names and trademarks on your behalf for your SaaS application and products. You may require this, as in certain countries you need to be a resident national of that country or have a company located in the country to make such registrations.

If you do grant the reseller such rights, it is essential that you regulate what happens to ownership of the trademarks, domains and use of your name if the reseller agreement is terminated or expires.

Territories

You should identify the territories in which the reseller may resell your SaaS application and products. List country names and do not refer to unclear terms such as EMEA, the Middle East or North Africa – there is no agreed definition of which countries these include. You should also decide whether or not your reseller should have exclusive or non-exclusive rights in the territories. If you grant the reseller exclusive rights ensure that you retain the right to make passive sales to customers, or you will be in breach of EU competition law.

EU and Local Competition Law

Depending upon the country in which you are based and the country in which the SaaS distributor is based, you will need to comply with the various anti-competitive laws that will automatically apply to the reseller agreement. Failure to comply with relevant competition laws could make not just an individual clause in the reseller agreement, but the whole agreement invalid. Additionally you could be subject to very large fines based on a substantial percentage of your annual turnover for breaches of competition law.

Help

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:

irene.bodle@bodlelaw.com
www.bodlelaw.com

To register for my newsletter click here

______________________________________________________

Other related articles:

SaaS Agreements – Reseller/Distribution – Need for a Reseller Agreement

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 a 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.

Why use a Reseller/Distributor?                                          

Most SaaS suppliers use distributors to enable them to sell their software and services to SaaS customers who would not otherwise purchase the SaaS software, due to the Supplier’s:

  • Lack of physical presence in the SaaS customer’s country;
  • Lack of sales channels and contacts in the SaaS customer’s country;
  • Inability to speak the local language;
  • Inability to provide SaaS customer support in the local language;
  • Inability to provide customer support within the SaaS customer’s local business hours;
  • Terms and conditions not being written in the SaaS customer’s language, or subject to local laws and regulations.

By using a distributor/reseller the above problems are resolved as the distributor/reseller sells the SaaS software directly to SaaS customers, in the local language, pursuant to local law, with local support as if the SaaS software was his own software.

Advantages

The main advantage of using a reseller/distributor is that the SaaS supplier will have no liability to SaaS customers – as there is no contract or legal relationship between the SaaS customer and the SaaS supplier. For example, any implementation issues or software errors that the SaaS customer encounters when using the SaaS software will be the reseller’s problem. The reseller will be liable to the SaaS customer and will be obliged to resolve such issues directly with the SaaS customer.

Disadvantages

The main disadvantage of using a reseller/distributor is that the SaaS supplier has no control over the sales process and in particular of the choice of SaaS customers. Also, the terms of the SaaS agreement itself will be subject to local anti-competitive laws and regulations.

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 SaaS customers in the agent’s territory.

An agent has no legal relationship with the SaaS customer as the agent has no contract with the SaaS customer. The SaaS supplier enters into a SaaS agreement, with the SaaS customer using the SaaS supplier’s own terms and conditions and SLA. The SaaS supplier is liable to the SaaS customers for issues and errors that may arise during use of the SaaS software.

Help

Irene Bodle is an IT lawyer specialising in SaaS agreements and cloud computing 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:

irene.bodle@bodlelaw.com
www.bodlelaw.com

To register for my newsletter click here

______________________________________________________

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SaaS, ASP Agreements – Distributor or Agent – Is there a Difference?

To find prospects, leads and sell SaaS software to customers on a global basis outside of the countries in which the supplier is located, you will need to use a distributor or agent.

Suppliers need to decide whether the local partner acts as an agent or a distributor. There are important differences between agency and distribution and the advantages and/or disadvantages of both need to be carefully considered.

What is an Agent?

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.

Any implementation issues or software errors that the customer encounters during the course of the SaaS agreement will be the supplier’s problem. The supplier will be liable to the customer under the SaaS agreement and will be obliged to resolve all issues directly with the customer.

What is a Distributor?

A distributor is a person or company who enters into a distribution agreement with a supplier to purchase the supplier’s SaaS software and services. The SaaS software will be sold to the distributor pursuant to the supplier’s SaaS terms and conditions and SLA. The distributor then resells the SaaS software and services to its local customers in the territory using the distributor’s own terms and conditions and SLA. A reseller is the same as a distributor.

The supplier has no legal relationship with customers – the supplier has no contract with customers. The distributor sells the SaaS software directly to customers, as if it were his own software. Any implementation issues or software errors that the customer encounters during the course of the SaaS agreement will be the distributor’s problem. The distributor will be  liable to the customer and will be obliged to resolve such issues directly with the customer.

Advantages and Disadvantages of Agency Agreements

Advantages:

  • the local knowledge of the agent
  • established commercial contacts of the agent
  • the agent speaks the language in the territory
  • the agent understands the local selling culture and customer requirements
  • the supplier retains control over the sales process and the choice of customers
  • the supplier uses its own terms and conditions

Disadvantages:

  • the supplier must adapt its terms and conditions to comply with local law
  • terms and conditions must be in the local language
  • if the agent is located in the EU, the supplier must pay commission for up to a year after termination of the agency agreement (regardless of the reason for termination)
  • the supplier can be liable for paying tax in some territories – as he is deemed to be trading there

Advantages and Disadvantages of Distribution Agreements

Advantages:

  • the local knowledge of the distributor
  • established commercial contacts of the distributor
  • the distributor speaks the local language
  • the distributor can provide customer support in the local language and within the customer’s local business hours
  • the distributor understands the local selling culture and customer requirements
  • the distributor uses its own terms and conditions which are already in the local language and compliant with local laws and regulations
  • the supplier does not need to adapt its terms and conditions to comply with local law
  • the supplier does not have to pay any mandatory fees after termination of the distribution agreement
  • the distributor will be responsible for obtaining local licenses and permits

Disadvantages:

  • the distributor has no control over the sales process
  • the distributor has limited control over choice of customers
  • in the EU,  anti-competitive terms in the agreement can result in large fines, for example price fixing, prohibiting passive sales
  • the length of the agreement  cannot be unlimited if exclusive rights are granted
  • local competition law will also apply to agreements involving parties outside of the EU

Help

Irene Bodle is an IT lawyer specialising in SaaS distribution and agency agreements with over 10 years experience in the IT sector. If you require assistance with any agency or distribution agreement, SaaS agreement or any other IT legal issue contact me:

irene.bodle@bodlelaw.com
www.bodlelaw.com

To register for my newsletter click here

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