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Agent or reseller: which one do I choose?

It’s wise to ponder this question carefully. From a legal point of view, reseller and agent differ from each other greatly.

Agent

An agent, or representative, mediates in concluding the agreement, but is not a contracting party himself. The contract is concluded between you and the customer, not the agent. As such, you are bound to the contract and should execute it. It is also possible for the agent to have him conclude the contract with the customer on your behalf and at your expense.

In return for acting as an intermediary, the agent receives a commission: this can either be a fixed amount or a percentage of the revenue or the price paid by the customer. When entering into an agency agreement you need to be aware of numerous legal requirements, most of which are mandatory law. Laying down arrangements, which contradict their applicability, will therefore have no effect. For instance, you’re obliged to provide the agent with commission statements on a monthly basis, and the agent is entitled to have your books inspected. The other thing that bothers entrepreneurs the most, is the entitlement to commission on transactions concluded after termination of the agency contract, the so-called ‘goodwill compensation’. The goodwill compensation is capped at 1-year commission, calculated on the basis of the average of the past 5 years.

Reseller

The reseller enters into contracts with its customers independently, also when you provide support on the products/services. Consequently, the reseller acts in its own name and for its own account. Because contracts are concluded between the reseller and customer directly, customers cannot so easily fire their demands and claims at you. Additionally, the risk of non-payment is not on you, as the reseller invoices the customers, and you only invoice the reseller. This is an essential difference from the agent.

When you conclude a reseller agreement, you’re not bound by all kinds of legal rules. But even with the absence of legal restraints, there still are specific issues to be taken into account when drafting a reseller agreement. Include, for example, provisions about how customers should be connected; the types of data the reseller needs to provide you in this connection. How are products purchased; how does that work with the licenses? How to deal with customer complaints about the reseller? What is the division of duties with regards to support; may customers contact you directly? Who carries out the implementation? Also, make sure your liability is limited.

Point of discussion in reselling is often whether or not you may take over customers when the reseller agreement is terminated. This is not standard procedure: these customers did not enter into an agreement with you, after all. Therefore, it is sensible to include an explicit right to this end in the agreement.

Making the choice between entering into an agreement with a reseller or an agent, should be done against the backdrop of the aforementioned points, as both types have advantages and disadvantages. Also, it is closely related to and contingent upon your business model. If you opt for the reseller, you can become dependent on these resellers. And an agent, on the other hand, is difficult to get rid of, to put it bluntly.

Philip van der Weijde

Legal adviser
Philip is a legal adviser at Legal ICT. His interests concern intellectual property rights in general, the various interfaces with the Internet and the increasing international issues in this area. In addition, he also deals with all aspects of e-commerce, privacy and advises in drafting and reviewing various IT contracts at Legal ICT. Due to his extensive foreign experience, he is also well-versed in English, both verbally and in writing.

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