SaaS Reseller Agreement: A General Guide
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A SaaS reseller is the middleman between the owner and the user of any software. Specifically, the SaaS reseller sells and markets software as a service. The exchange of services and goods between third parties is quite normal in today's world. One such exchange commonly seen is in the field of SaaS, which is Software as a Service.
What is a SaaS Reseller Agreement?
A SaaS reseller has the right to sell the services of the owner or the publisher. In addition, they can sell these services to others, that is, a third party. The partnership or the association between the software owner and the middle party or the reseller can also be channeling. Before agreeing, there are several things that both the parties, the owner and the SaaS reseller, must keep in mind.
A SaaS agreement mentions all the details discussed between the software owner and the reseller. It is important to sign an agreement before the reseller is permitted to sell any of the services to a third party. This agreement legally states that the reseller can market and sell the software with the owner's permission. It rules out any legal troubles for the reseller and saves them for copyright cases. However, it is not the sole measure to prevent copyright cases so make sure you have the necessary licenses and permission to sell the software. Further, it helps to protect the ownership of the software and defines the trademark policies.
Top Considerations for SaaS Reseller Contracts
Here are some parameters that a SaaS reseller must be aware of.
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Recent Laws
Government laws can often be confusing, especially when it comes to reselling. It is important to keep in mind the recent and old norms set up by the government. However, following the rules and regulations can be tricky, especially if the owner of the SaaS and the reseller are from different nations.
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Ownership Clause
This is an important term that every software reseller agreement must have. It clearly states who the owner of the software is. In most cases, the publisher has complete control and holds complete rights to the software. However, some SaaS owners also distribute their rights to investors and other parties, which must be clearly stated in the agreement. Moreover, if there is any percentage sharing between the owner and the reseller, it, too, must be mentioned.
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Intellectual property rights refer to the knowledge or private information of the software. As per this norm, the reseller may not have the right to pass on vital information about the application to other parties. It is also possible that the owner withholds certain software rights and prevents the reseller from using them, such as trademarks. Even after stating this, if the reseller uses these, they can be sued on the grounds of copyright infringement.
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Payment Terms
When it comes to any agreement, the payment terms must be stated. For example, if the owner is paying a certain amount to the reseller monthly or if there is any percentage sharing based on the sales, it must be illustrated. Further, the mode of payment, due dates, late payment charges, etc., must also be mentioned in the agreement.
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Additional Services
As a reseller, the person himself must be aware of how the software works. Only then shall they be able to sell or market it better. If the reseller and the publisher have decided upon any training sessions, it must be outlined in the agreement. Furthermore, if there are any other clauses that the parties have agreed upon, they must be mentioned within the contract.
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Types of SaaS reseller agreements
When it comes to a SaaS reseller agreement, there are a few types of contracts that you must know about. Here are some of them-
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Top-Down Arrangements
There is a fixed guideline for resellers forming contracts with their customers. It lays out the standard customer terms that are suitable for high-volume deals. A top-down arrangement is typically used when the reseller is selling SMEs.
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Bottom-Up Arrangements
In the structure, there is an active negotiation between the third party and the reseller. A bottom-up arrangement is often used when working with large corporate customers.
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Third-Party Contracts
These are the riskiest and the most complicated type of contracts. A third-party contract is used when a third-party is going to sell or distribute your SaaS on your behalf. A vendor grants the reseller rights to enter into a contract with a third-party.
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What is the Role of a Lawyer in SaaS Reseller Agreement?
Drafting contracts and ensuring that they are up to date and all aspects are met is tricky. At the same time, these contracts must be fruitful and mutually benefit each party for a long-term alliance. A lawyer can assist you with the life-long technicalities by drafting the contract himself. Consult with a qualified attorney who specializes in technology and contract law. Here are some reasons why hiring a lawyer is a good idea:
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Understands the Technical Norms
It is ideal to be safe and secure before signing any contract or agreement with the software owner that can put you in a fix later. A lawyer will help you understand the technical aspects of the contract and take your opinion on what you want. Based on this, they shall negotiate the terms with the publisher.
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Payment System
Most resellers have a defined pay structure of their own. However, it can also vary as per the software or the publisher. Generally, a fixed monthly amount is decided upon, along with a percentage in profit-sharing. These must also be clear if the third party offers discounts.
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Fix the Number of Resellers
Having a large number of resellers for a single SaaS product can increase your competition in the market. If you wish to cap this number, it is important to mention so in the contract. A lawyer will help you create this clause, where the owner is not able to make any more resellers. This gives you clear-cut leverage in the market.
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Value Added Services
As a reseller, you will always seek ways to upscale your service to the customers. Adding side services will help boost your client base and the sales of the product. However, the reseller must take prior permission from the owner or the publisher to provide additional services to their customers. These services can include free installation of the product, live demonstration, or free use for a set time.
Conclusion
If you are planning on becoming a SaaS reseller, you now know the things that you must consider beforehand. There are a number of complications, such as copyright infringement, revenue sharing, and limitation to distribution, that must be decided on. An agreement helps you protect yourself in case things go south in the future. To make things easier for yourself, get a lawyer on board to help you with expert advice. You can simply visit ContractsCounsel and get the best legal advice today.
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I am an attorney licensed in both California and Mexico. I offer a unique blend of 14 years of legal expertise that bridges the gap between diverse legal landscapes. My background is enriched by significant roles as in-house counsel for global powerhouses such as Anheuser-Busch, Campari Group, and Grupo Lala, alongside contributions to Tier 1 law firms. I specialize in navigating the complexities of two pivotal areas: AI/Tech Innovation: With a profound grasp of both cutting-edge transformer models and foundational machine learning technologies, I am your go-to advisor for integrating these advancements into your business. Whether it's B2B or B2C applications, I ensure that your company harnesses the power of AI in a manner that's not only enterprise-friendly but also fully compliant with regulatory standards. Cross-Border Excellence: My expertise extends beyond borders, with over a decade of experience facilitating cross-border operations for companies in more than 20 countries. I am particularly adept at enhancing US-Mexico operations, ensuring seamless and efficient business transactions across these territories.
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Tim E.
Tim advises small businesses, entrepreneurs, and start-ups on a wide range of legal matters. He has experience with company formation and restructuring, capital and equity planning, tax planning and tax controversy, contract drafting, and employment law issues. His clients range from side gig sole proprietors to companies recognized by Inc. magazine.
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Erdal Turnacioglu of Erdal Employment Law focuses on providing employment solutions to both employees and businesses, whether through litigation, review of employee handbooks, workplace investigations, or training seminars.
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I am an experienced attorney working in New York specializing in executive compensation/severance arrangements, transactional real estate work, tax structuring and contracts.
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Wendy C.
Business Advisor and Real Estate Consultant: Small boutique firm working to assist entrepreneurs, business start-ups, property investors, new home buyers, and distressed owners Wendy Calvert began her career as a corporate attorney focusing on complex commercial litigation, primarily in construction, property and casualty, and contractor liability. Through this experience, Wendy has managed and successfully litigated cases in Illinois and Wisconsin. In 2004, Wendy relocated to Illinois to work as an insurance litigation counsel and later as an executive sales consultant and insurance expert. Wendy now utilizes her skills as a contract negotiator, litigator, and sales consultant to negotiate real estate deals and help entrepreneurs create and grow the businesses of their dreams. EDUCATION Wendy earned her Juris Doctor in 1999 from the University of Wisconsin Madison. In 1989, Wendy graduated with a Bachelor of Arts in Business Administration and Communications from Marquette University.
Max L.
Hi there. My practice focuses on several aspects of business law, including business entity formation and organizational documents, trademark and copyright, tax disputes, and contracts. I work with quite a few creative entrepreneurs, such as photographers, artists, and musicians.
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SaaS Reseller Agreement Drafting
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SaaS
SaaS Reseller Agreement
California
Can you explain the key provisions that should be included in a SaaS Reseller Agreement?
I am currently in the process of negotiating a SaaS Reseller Agreement with a software company to resell their cloud-based software to my clients. I have some experience in reselling software, but I am not familiar with the specific provisions that should be included in this type of agreement. I want to ensure that the agreement protects my interests as a reseller and clearly outlines the rights and responsibilities of both parties, such as pricing, payment terms, intellectual property rights, termination, and liability. I would appreciate your guidance on the key provisions that should be included in a SaaS Reseller Agreement to ensure a fair and mutually beneficial relationship with the software company.
Dolan W.
Hello! There are four main things I look for in creating the agreement: 1. The agreement should state the reseller's rights to market, sell, and distribute the software, including any limitations like geographic restrictions or specific customer segments they cannot target. It must also detail the licensing model for end customers, outlining subscription terms, usage rights, and any limitations on the number of users or features. 2. It should also contain a very comprehensive pricing structure for the reseller, including details on wholesale discounts, volume-based pricing, or tiered pricing models. Payment terms, including schedules, accepted methods, and any penalties for late payments, must be clearly defined. If a revenue-sharing or commission model is in place, the agreement should outline how revenue will be divided between the provider and reseller, specifying commission percentages or revenue splits. 3. Also, the agreement should clearly outline the responsibilities of both the reseller and the provider. This includes detailing the reseller's duties in sales and marketing, customer support, and technical assistance. 4. Finally, CLEAR ownership of customer data collected through the software is super important, including usage data and personal information. Happy trails!
Contracts
SaaS Reseller Agreement
North Carolina
Can a SaaS reseller agreement be terminated by the software provider without cause?
Can a SaaS reseller agreement be terminated by the software provider without cause? I am a software reseller who has entered into a reseller agreement with a SaaS provider. The agreement does not specify any termination clauses or conditions, but it also does not explicitly state that the software provider can terminate the agreement without cause. Recently, the software provider informed me that they will be terminating the agreement without providing any specific reason. I am concerned about the potential impact on my business and want to understand if the software provider has the legal right to terminate the agreement without cause, and if so, what my options are moving forward.
Jeff G.
Hi. The answer is entirely dependent on the agreement’s language. Without seeing the contract, it’s impossible to give you a complete answer. Generally, an agreement can only be terminated by it’s own conditions, and absent a specific termination clause, it can usually be terminated either due to a breach of the agreement or by suing for breach and asking for termination as the result (so-called “equitable relief”). But with a reseller agreement, there are lots of new variables, as you’re not a user of the product… questions about to who and when you can resell., specific product versions, support provisions, etc. And there’s also a general prohibition against contracts of servitude, requiring an indefinite provision of personal services (which a SaaS contract could be argued to be). So again, the contract language is critical.
Representations and Warranties
SaaS Reseller Agreement
Texas
Is it necessary to have a non-compete clause in a SaaS Reseller Agreement?
I am in the process of negotiating a SaaS Reseller Agreement with a software company, and I am unsure whether it is necessary to include a non-compete clause in the agreement. As a reseller, I will be selling the software to clients and potentially competing with other resellers, but I want to ensure that my interests are protected and that I am not restricted from working with other software companies in the future. I would like to understand the potential benefits and drawbacks of including a non-compete clause in this agreement, and whether it is common practice in the SaaS industry.
Darryl S.
No - this is not at all a required clause in a SaaS reseller agreement and in fact is likely to cause some confusion if not carefully drafted. The other resellers already compete with you and you will sell other software, sometimes that competes with the provider. Please review this clause carefully if it is included.
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