What Should A Channel Partnership Agreement Include?

Definition Of Terms

There are some sections of a channel partnership agreement that can quickly become overly complicated and wordy. Contained within the agreement are necessary legal and marketing jargon that the partners or parties involved may not be unfamiliar with. Including a glossary or definition of terms within your channel partnership agreement which is often the best manner to deliver the technical information while filling in the informational gaps that all relevant parties might have.

Confidentiality Clause - Channel Partnership Agreement

In any channel partnership, there will be a need for a confidentiality clause because when working closely with another company, there will be an exchange of confidential information. It’s critical to include this section to protect both companies from the possibility of leaked trade or proprietary secrets.

Payment Terms

A channel partnership agreement without payment terms could result in some serious repercussions such as demands for payments that are unwarranted. The terms of payment must be explicitly stated including:

• How much money channel partners can expect to receive in exchange for products sold on your behalf

• When payment will be received

• How the money will be received (i.e., by check, credit, direct deposit, etc…)

• Refund clauses (i.e., refunded products will not result in payment)

• What happens to payments in the event that channel partnership is ended (i.e., all compensation will be terminated at the conclusion of this partnership)

Marketing Efforts

Marketing efforts must be written into channel partnership agreement as a means of accountability. Any advertising guidelines must also be stated. For example, many companies impose strict marketing and promotion guidelines to ensure they are consistent with messaging. Others impose strict promotion guidelines for legal reasons due to standards organizations that regulate how a company can market themselves. By putting marketing efforts in writing, it protects all parties involved by ensuring everyone knows what is expected and permitted.

It’s worth noting however, that this section of the agreement can allow for some wiggle room. You don’t need to state things like frequency of social media promotions, for instance. On the other hand, the more explicit you are in stating your terms, the more likely you are to ensure parties live up to the expectations set before them.

Indemnification

It’s no secret that it can cost a lot of money to run a business, and by extension there may be several expenses incurred in a channel partnership. This section of a channel partnership agreement, therefore, expresses who will shoulder the costs incurred. For example, who is paying advertising costs to promote the offering?

Intellectual Property

This section of a channel partnership agreement states ownership of the intellectual property related to marketing materials, the product being sold, websites and domains, etc… For example, the partner producing the offering (Company A) should retain all ownership rights to what is being sold, but the partner selling it on their own website (Company B) will retain ownership of their website. Just because Company B is using their website to promote Company A’s product does not mean they own any intellectual property rights of Company A’s product. At the same time, this agreement would not give Company A any intellectual property rights ownership over Company B’s website.

Responsibilities

Who is responsible for what? In what capacity? By stating responsibilities within a channel partnership agreement, you eliminate confusion of roles and activity requirements.

Relationship Of The Company

Similar to roles and responsibilities, this clause of a channel partnership agreement explicitly states who is the one producing the product and who is selling the product.

Disclaimer, Limitation On Liability

If a company producing football helmets forms a partnership with a retail partner, and the retail partner is sued for a defective helmet sold in their store - the Limitation on Liability clause will determine who shoulders the cost of the legal expenses. After all, the helmet defect could have been a direct result of how the retailer handled the helmet, and not the fault of the manufacturer.

Termination

Partnership agreements are not always harmonious relationships, and there is no guaranteed success. For example, a partner company could infringe your intellectual property and steal trade secrets. As such, it’s vital to have a termination section to cover in detail the consequences of any breach of terms in the agreement.

Additionally, even if it is a good relationship, you need to explicitly state the terms of terminating the agreement. For example, is your company entering into an agreement that spans for one year with a partner company? You need to state how the partnership will end, and what happens after the fact.

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