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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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Meet some of our Marketplace Vendor Agreement Lawyers
August 2, 2021
I have been practicing law for more than 4 years at a small firm in York County, Maine. I recently decided to hang my shingle, Dirigo Law LLC. My practice focuses mostly on Real Estate / Corporate transactions, Wills, Trusts, and Probate matters.
August 5, 2021
My name is Melissa “Mel” Green and I provide legal counsel to entrepreneurs, start-ups, and small businesses that is clear, concise, and focused on the practical impact of decisions. As trusted legal counsel, I proactively identify risks, and develop effective, practical solutions that protect my clients businesses, create positive outcomes, and help mitigate legal exposure. My areas of expertise include business formation, contract law/commercial transactions, healthcare law, and intellectual property. I also provide services as an outside general counsel or “fractional general counsel”. Prior to starting my own law firm, I spent the majority of my career in-house at large and small corporations, both for profit and not-for-profit, working with senior and executive management, in addition to other stakeholders at a variety of management levels. to proactively identify and address risks, mitigate legal exposure, streamline processes, lead persuasive negotiations that are integral to ensuring positive outcomes for the organization, and deliver hands-on, spectacular client service. There came a time when I realized that individuals and smaller entities were not receiving the same level of legal support and guidance as mid-size to large companies and as a result, individuals and small businesses were not growing and sustaining on the same level. I wanted to use my expertise to provide those that were underserved by the legal market with competent counsel at an affordable price. With the increasing number of new businesses, I knew that I could make a difference to those that needed legal guidance but were putting it off in fear of “Big Law” prices. I love to “partner” with my clients, get a deep understanding of their business, develop lasting professional relationships and watch them prosper. I want to find a way to help my clients maximize the reach, value and impact of their business. Services that I have provided over the course of my career: (i) reviewing, drafting and negotiating commercial agreements (leases, MSAs and SOWs, consulting services agreements, confidentiality agreements, SaaS agreements, coaching agreements, independent contractor agreements, coaching agreements, photographer agreements, waivers and releases, licensing agreements, etc.), (ii) business formation (operating agreements, written consents, bylaws, etc.), (iii) preparing policies and procedures for businesses in highly regulated industries, (iv) conducting federal trademark searches and filing trademark applications/preparing trademark opinion letters after conducting appropriate legal research, and (v) general business counsel.
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Robert is a skilled corporate lawyer, licensed to practice law in NY and DC. He has over 25 years of experience, with a focus on Venture Capital, Private Equity, M&A, General Business Law and Company Formation. Robert brings business side experience to every legal transactions. This allows him to shape a client's legal needs around its business goals to drive success in an effective and efficient manner.
August 3, 2021
Tim has 20 years of experience representing a wide variety of emerging and established companies in the technology, software, bitcoin and professional services industries. He works directly with his clients’ executives and boards of directors on corporate, intellectual property, and securities law issues. Recently, Tim has advised clients on Series A and Series B financings, corporate structuring, complex video licensing agreements, and structuring new hedge funds. Tim previously served as Forrester Research, Inc.’s General Counsel and Secretary where he was chief legal officer, led the company’s legal group, and managed the company’s legal and regulatory affairs. Tim played an integral role in the company’s initial public offering in 1997 and coordinated its secondary offering in 2000. He directed the legal process in the company’s acquisitions of Giga Information Group, Inc., Fletcher Research and Forit GmbH and oversaw over $125million in transactions. He also managed the company’s intellectual property assets. Tim is admitted to practice in Massachusetts and New York. Tim holds a Juris Doctor degree from the Boston College Law School and a Bachelor of Arts degree from Trinity College
August 4, 2021
I’m a New York based attorney with substantial experience in media and art law, corporate structuring and commercial contracts. For the past several years, I have been advising startups and new business on their legal needs, with a special focus on tech and entertainment.
August 4, 2021
Robert Jay H.
My Legal career hasfocused on representing businesses (corporations and limited liability companies) as general outside counsel. In this capacity, I have drafted a broad range of legal documents as well as analyzed proposed agreements drafted by the other party's attorney to the agreement for the pupose of determining the risks to which my client would be exposed. I maintained the client's minute book if no one in-house was available for that task. Additionally, if rquested, I served as a general advisor to the client's executive offers and to its Board of Directors.
August 5, 2021
Corporate counsel with years of in-house experience working with and reporting to board / executive-level and upper management, along with extensive regional / national law firm background in commercial transactions and contracts, complex commercial litigation, and employment matters. Skilled at executing corporate priorities, driving profitability by implementing goal-oriented processes to achieve revenue and productivity targets, and managing company litigation and outside counsel. Recognized for creating policies and practices to address ethical dilemmas and resolving misconduct.