Drafting an IT Reseller Agreement – Term and Termination

Your IT Reseller Agreement is an important document between yourself as a distributor and your reseller. It should set out the terms of the relationship and the terms on which the software can be resold. It is also important to have a strong and well drafted termination clause which addresses how the agreement can be terminated and the reasons that each party can terminate. Usually the agreement will commence on the date the agreement is executed and will then be valid for the term set out in the IT Reseller Agreement, and continue unless it is terminated by either party in accordance with the IT Reseller Agreement. This makes the process of terminating the relationship clearer and less confusing for each party.

Termination Clause

This clause will usually identify reasons that the party can immediately terminate the agreement. In addition, it identifies reasons that the parties can terminate with notice. The notice period is typically between 1-3 months. Events where the party can immediately terminate the IT Reseller Agreement are described as “events of default”. These can include, if the reseller does not pay fees that are due, when and if either party makes any untrue or misleading representation, warranty or statement, if any party’s financial situations change such that a party is not able to perform its obligations under the agreement, or lastly, when a party becomes bankrupt or the business is wound up. If you are the distributor, you should make sure to include a clause which allows you to terminate the agreement if you decide to stop selling the product or if the product is withdrawn from sale for another reason. It is also important to include a number of obligations on the reseller upon terminating the agreement. This will assist in the process of termination and the process of ending the relationship between the contracting parties.

Usually the clause may provide that, upon termination of this agreement, the reseller will immediately stop selling the software and cease making any representation that the reseller is an authorised or licensed reseller of the software, will immediately stop placing orders for the software, will immediately return to the distributor the distributor’s property, including confidential information, any marketing material provided and pay to the distributor any amount owed under the agreement, including in respect of any indemnities provided under the agreement.

Upon termination of this agreement, the reseller will be required to pay the distributor any outstanding amounts for software that the reseller has sold. Any rights, obligations and remedies of the parties set out in the agreement are not affected by the termination of the agreement.

Conclusion

As a distributor, if you don’t know how to go about drafting your IT Reseller Agreement, you should speak with a qualified, experienced business lawyer, preferably one with experience with drafting IT Reseller Agreements. At LegalVision we work with software developers on a regular basis and can assist with you legal issues related to running your business and reselling software. So if you’re in need of legal advice, contact us on 1300 544 755 and speak with one of our business lawyers.