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What Is a Marketplace Vendor Agreement?
A marketplace vendor agreement is a legal document between a vendor (seller) and an online marketplace business. This document lays out terms and conditions for the vendor to sell goods or services on the marketplace’s platform.
In addition to establishing regulations and permissions, the vendor agreement also outlines services the seller can access during their ongoing participation on the platform.
The vendor agreement may accompany a Statement of Work (SoW) from the vendor. The Statement of Work is a way marketplaces can manage a vendor or freelance contractor using their platform.
A Statement of Work is a legally binding document that details the scope of work or products the vendor or contractor will perform or deliver, timelines, payment terms, liabilities, and other responsibilities.
Within the marketplace vendor agreement, the company may include a sales commission agreement that allows the seller to freely operate on their platform in exchange for a percentage of their sales.
Here is an example of a commission agreement template that you can review.
What Is a Marketplace Vendor?
A marketplace vendor is a seller or the supply-side of a marketplace. For example, people who hail a car on Uber hire a marketplace vendor, the car's driver. For Airbnb, the marketplace vendor would be the host providing their property for short-term rentals.
Using an online marketplace allows someone to become an e-commerce vendor. Although they are considered self-employed, they must still follow the terms and conditions of the marketplace to keep their store open.
The marketplace “leases” a digital space to the seller in exchange for commission or subscription fees.
Here is an article where you can learn more about the definition of a marketplace and how it’s evolved over the years.
What Needs to Be Included in a Marketplace Vendor Agreement?
Each marketplace will establish its own terms and conditions, so agreements will vary by the marketplace. That being said, you will still find several common characteristics in any legally sound marketplace vendor agreement.
- Scope of services : The agreement should outline exactly what the vendor may use the marketplace for, e.g., the direct sale of goods or services to the public.
- Parties involved : The marketplace and vendors should be listed at relevant points. For example, the company that runs the marketplace, the vendor's name and any affiliated e-commerce stores should be included.
- Payment terms : The agreement should explain how the marketplace will collect money from the vendor, how much the vendor is subject to pay, and what payment methods the marketplace accepts.
- A dispute resolution process : Dispute resolution clauses outline the legal steps either party will take if one fails to uphold their obligations in the agreement.
- Effective start and end dates : The start and end dates should reflect exactly when the vendor agreement goes into effect and when it ends. The marketplace should mention how subscription renewals, and auto-renewals, impact the end date.
- Disclaimers and liabilities : The marketplace should limit its liability by stating what damages it will not cover for the vendor. This can include personal damages, personal injury, and lost wages while advertising or selling on the platform.
- Signatures and dates of all parties : The marketplace and vendors must sign and date the vendor agreement form to be legally enforceable. Without signatures and dates, there is no evidence that the parties agreed to the contract's terms.
Many marketplaces may expand their vendor agreements to reflect elements specific to their platform. For example, additional services that are not included in a subscription may affect the vendor’s total financial liability.
It is a good idea to list these services, their costs, and how a seller will be billed if they elect to purchase them.
In addition, vendors may sign a vendor confidentiality agreement to keep certain information about sellers and the marketplace private.
Here is an article about different types of legal agreements in online marketplaces.
Image via Pexels by RODNAE Productions
Who Uses a Marketplace Vendor Agreement?
Anyone who sells goods or services through a marketplace will need to sign a marketplace vendor agreement. While some marketplaces may not require a vendor agreement, most do. This protects the company from liabilities in the event of injury, damages, or other losses the vendor experiences.
Using a standard vendor agreement also gives the vendor certain rights on the platform that they cannot have revoked. For example, if someone signs up for a one-year subscription to a service, having the signed agreement helps them demonstrate their legal right to use the marketplace for the length of their subscription term.
Do I Need Two Agreements for a Marketplace Vendor and a Marketplace Customer?
Yes, you will need to provide a different agreement for the customer. The terms and conditions of being a vendor are not the same for customers who purchase goods or services through the marketplace.
Using a marketplace customer agreement (sometimes a Term of Service ) allows your company to give the customers an extra layer of protection while waiving the company for liability if vendors do not provide services as advertised.
For example, imagine a client orders a logo design through a freelance graphic designer on a marketplace like Upwork. By signing a customer agreement, the client cannot hold UpWork legally accountable if the freelance designer fails to meet expectations or deliver the product properly.
However, per the marketplace vendor agreement, the customer could report the vendor. The vendor may lose their right to sell on the marketplace if they do not fulfill customers’ orders or adhere to the company’s sales policies.
Here is an article that explores the current limits of marketplace liability and its effects on customers.
Why Is a Marketplace Vendor Agreement Important?
There are several reasons why using a marketplace vendor agreement is important.
- It ensures that the marketplace applies and collects sales tax as required in their sellers’ states.
- It provides liability limitations for the marketplace.
- It establishes regulations and terms and conditions for platform use that the vendor must follow.
The vendor agreement can also lay out guidelines for a vendor's services. The agreement minimizes the marketplace’s risks while setting clear rules, boundaries, and expectations for the vendor.
A standard vendor agreement protects the company and vendor more than no agreement. Without any, there could be a large risk of marketplace abuse, and the company could take vendors’ profits without any way for the seller to prove what they were owed legally.
A vendor is someone who runs a business. The marketplace is, in a sense, a partner in that business. Although they do not own the vendor’s company in any way, their platform is what allows customers to patronize the vendor.
So, having a marketplace vendor agreement ensures that the vendor and the marketplace are equally protected and follow appropriate conduct.
Here is an article about marketplace seller state guidelines that may be enforced in a vendor agreement.
How Do I Draft a Marketplace Vendor Agreement?
If necessary, you can download a free vendor agreement online and a commission agreement template. Contract templates allow you to easily modify the agreement's contents to reflect each client's needs.
You could also contact an internet lawyer well-versed in business and contract law. They can draft a marketplace vendor agreement for you that covers all your company's most important liabilities and needs.
Although templates are a good way to begin any contract, you should ensure that all the necessary elements are in place to prevent legal disputes. Consider sending your draft to a lawyer for review to ensure it fully covers your business. In most cases, marketplaces have nuanced services or products, so it may be hard to find a legal template that fits your use case.
Likewise, vendors may consider reaching out to a lawyer to review an agreement if they are unsure about the contract terms, conditions, and other elements.
Here is an article to review a vendor agreement template.
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