Overview of a VAR Reseller Agreement

VAR Reseller Agreement (Value-Added Reseller Agreement)

VAR Reseller Agreement is a legally binding contract, between a manufacturer or a developer and a VAR reseller, stating the responsibilities and the rights of the parties regarding a product or a service.

What is the VAR Agreement?

A VAR agreement is a legal contract between a manufacturer or a developer of a product or service, and a value-added reseller, in which set out and specifies the rights and obligations of both parties. Since a VAR usually purchases a product or a service from a manufacturer or a developer, and adding value to that product or service by adding more features and development to it, and then reselling the product as its own, a VAR agreement specifies the conditions that must be adhered to and respected by both parties throughout that process. 

What is “VAR”?

A VAR (value added reseller) is a business or a company that specialize in reselling products or services, commonly in the IT and technology sectors, and adding features or services or developing products or services to resell as a complete package with added value.

The added value comes from either combining a number of independently sourced products from different suppliers or adding services such as consulting, customizing, support or training.

What is the “Value-Added Product”?

A value-added product is any product or service that was originally purchased from a manufacturer or developer, then developed by adding features or services enabling the VAR to increase the profit margin of the product.

Value-added product is the subject of the VAR agreement since it deals with several elements related to its copyrights and licensing.

Key Elements of the VAR Agreement:

Since the VAR agreement is a key legal document that constitute the legal duties, responsibilities, and legal rights of both parties, and the key elements that are necessary to include within the clauses of the agreement, which are the following:

The specific products/services available to the VAR

As the value-added product or service is the sole reason why both parties entered this agreement. Therefore, a brief summary of the specific product or service that the VAR is aiming to develop, or adding a detailed description of the product as an attachment to the agreement.

Exclusivity or non-exclusivity

Exclusive/non-exclusive clauses are one of the most important key elements of the VAR Agreement, since it specifies if the VAR is the only person who is allowed to work on the specific product/service that is provided by the manufacturer.

Most agreements lean to stating that the appointment of this agreement is non-exclusive to the VAR of the agreement, since there are different VARs who would develop the product/service in different countries, but would include an exclusivity clause on a specific industry or field, such as the insurance industry or military field for example.

This section may include the geographical area in which the VAR may resell the products.

How those products will be marketed?

As the VAR is aiming to develop the product or service that the manufacturer provided to resell it with additional value to it, both parties should be informed of how the product is going to be marketed, and the percentage of the profits that both parties may share, and a detailed plan of the product’s sale organization and activities. Moreover, the detailed plan may include several provisions of how the VAR is going to hire experts and technicians for example, or permitting other companies to market the product. This part is considered one of the VAR obligations to ensure that they are taking the appropriate measures in marketing the product.

It also includes how the product’s Ordering, Delivery, and Shipment as an independent clause, detailing this procedure that will be done by the VAR.

Product’s price

This part deals with the prices of the product(s)/service(s) that are provided by the manufacturer, and is purchased by the VAR in order to develop it and sell it as a bundle deal. This clause set out the specific prices of each and every product/service for the VAR to purchase, and it can be set out in a detailed attachment, with a disclaimer stating that the prices are subject to changes if needed, stating the written notice period of any possible changes.

Product/service Changes

Products/services that are provided by the manufacturer can sometimes require a change in them before sending it to VARs for reasons, this clause set out the appropriate actions that must be taken to notify the VAR about the changes that may occur to the products, which states the notice period and the form of the notice.

Changes and Cancellations (by the VAR)

This section deals with the possible changes and cancellation of orders by the VAR, which set out the right of the VAR of cancelling the orders based on agreed reasons, in addition to setting out a cancellation fee if needed.

License

Giving an official license to VARs by the manufacturer is essential to proceed developing and adding features to the product, in order to create a value-added product that both parties can profit from.

This section can include any sub-licensing to other companies that may have a role in the development of the product.

Confidentiality

Accessing confidential documents or information about the product can be essential for the development of the product, which urge the need of including provisions regarding the usage of the confidential information and the persons who are allowed to access them.

Warranties

Any warrants or guarantees that the parties may offer can be included in a clause within the agreement, or within different clauses, such as the clauses related to the marketing of the product for example.

Indemnification

Indemnification is pairing any losses that happen during any process related to the agreement. This clause can be set out as agreed on between the parties on who pair the burden of the losses on specific incidents.

Term and Termination

VAR agreements take effect for a specific period of time, which is called the term of the contract. This section of the agreement should state the exact date that the agreement will take effect, and the term of the contract.

The termination of the VAR agreement may happen for any breach of the contracting parties’ obligations, or other reasons that the parties agree on, which can be stated in a clause within the agreement.

Governing Law

As conflicts may arise between parties regarding the VAR agreement, a clause that set out the governing law that will be applicable to the dispute can help in informing the parties on their rights and the possible legal actions that can be taken to settle any dispute that may arise between them.

Key Points:

  •       Detailed products/services description
  •       Exclusivity or non-exclusivity
  •       The marketing of the product
  •       Ordering, Delivery, and Shipment
  •       Product’s price
  •       Product/service Changes
  •       Changes and Cancellations
  •       License
  •       Confidentiality
  •       Warranties
  •       Indemnification
  •       Term and Termination
  •       Governing Law

 

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