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Hardware Reseller Agents & Distributors

There are 2 primary types of resellers of hardware; the first is where the ICT supplier acts as an independent legal entity with a genuine right to resell (Distributor) and the second is where the ICT supplier merely acts as the original equipment manufacturer’s legal agent (Reseller Agent).

DISTRIBUTORS

In these circumstances, the distribution agreement between the OEM and the ICT supplier provides that the original equipment manufacturer (OEM) sells the hardware to the ICT supplier and licenses any software which is on the hardware, or bundled with the hardware, to the ICT supplier and the ICT supplier is obliged to pay the OEM for that hardware and licensed software at a pre-agreed rate. Typically, payment is not contingent upon the ICT supplier entering into any contract with a customer for the re-sale of that hardware and/or software. The OEM provides the ICT supplier with a right to re-sell that hardware and sub-license that software to a customer in a particular territory for a defined time period. It is common in this type of distribution agreement for the OEM to provide third line support services to the ICT supplier, who may then re-supply those services to any of the ICT supplier’s customers. Typically, the ICT supplier is obliged to provide first and second line support to its customers and sub-contract third line support from the OEM. The ICT supplier is liable directly to the customer if the hardware fails to work in accordance with its contract and the customer is entitled to sue the ICT supplier for those faults. If the customer does not pay the ICT supplier for the goods then the ICT supplier can sue the customer for non-payment. If the ICT supplier does not pay the OEM for the hardware then the OEM can sue the ICT supplier for payment, even if the ICT supplier has not resold the hardware to a customer, or if the customer has not paid the ICT supplier for the hardware.

RESELLER AGENT

The legal relationship of an ICT supplier as an agent is significantly different to the nature of a legal relationship of an ICT supplier under a distribution agreement. If the ICT supplier is acting as the agent of the OEM when the ICT supplier enters into a transaction with the customer, then, at law, the customer has entered into a contract directly with the OEM. Accordingly, if the hardware is defective then the customer will have a right to claim damages directly against the OEM and not against the ICT supplier, as the ICT supplier is merely the agent of the OEM.

Both the distribution and Reseller Agent models are used in the ICT industry and in some cases there is a combination of the 2 models in a single arrangement between an ICT supplier and an OEM. It is possible, for example, that the hardware is provided under a distribution arrangement with title being passed from the OEM to the ICT supplier, then the ICT supplier selling the hardware to its customer and passing title from the ICT supplier to the customer, whilst at the same time acting as agent for the supply of any bundled software that is incorporated into the overall deliverable that is provided to the customer. Sometimes warranty services are provided by the ICT supplier as an independent distributor whereas maintenance services are provided by an ICT supplier as an agent of the OEM.

In all circumstances it is essential to understand the legal relationship between the ICT supplier and the OEM and from the ICT supplier’s perspective it should ensure that it complies with the terms of any distribution agreement between its ICT supplier and the OEM. It should ensure that the ICT supplier’s agreement with its customer is consistent with the terms and conditions of the agreement between the ICT supplier and its OEM. The areas where it is particularly important to ensure consistency include:

Timing of passing of title;
Software licence rights;
Description of warranty and maintenance services; and
Warranties and indemnities.

Next, learn about Warranty and Maintenance.

Why you need Hardware Sale & Maintenance Agreements Passing of Title Warranty Obligations for Hardware Sellers Hardware Reseller Agents & Distributors Warranty and Maintenance for Hardware Key Commercial Issues for Hardware Sales Tips to Make Money

Master Hardware Sale Agreement Master Hardware Sale & Maintenance Agreement Master Hardware Maintenance Services Agreement

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