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Read the fine print
By Dhaval Valia
 Have you ever read the partnership contracts that you sign with your vendors? Did you know that even as HP PSG is demanding brand exclusivity from resellers who want to become its partners, according to many former sub-distributors of HP the contract document doesn’t mention the term ‘brand exclusivity’ even once?
Recently, a partner told me that a leading vendor has sent letters to several of its partners stating that they would like to audit the partners’ business. When the partner refused, he was sent a notice by the vendor’s legal department stating that the partner’s contract made it mandatory for him to comply with the vendor’s demand. This came as a shock to the partner because he hadn’t read the contract.
Another large systems integrator, who aspires to list his company soon, has also been sent a similar notice for accounts auditing by the same vendor.
When I spoke to other partners I discovered that auditing partner accounts is a mandatory clause in most vendor agreements. In essence, vendors can audit your accounts at will if they wish to. While this is scary enough, what is even scarier is that many partners seem to have no idea about the existence of such clause in the partnership agreement simply because they have never read the agreement.
Most contracts that partners sign with their vendors are legally-binding documents that can be taken up in a court of law. It is therefore essential for any partner to read these contracts before he signs on the dotted line to understand his legal liabilities if he signs the contracts. I would advise partners to hire a legal consultant to help them interpret the contracts in order to avoid complications later.
Channel associations need to play a leading role in this matter. The associations can hire good legal consultants to go through the contracts of all major vendors, underline the fine print that could cause legal liabilities for resellers later, and share the information with members of the associations.
They also need to take strong objection to contracts that are unilateral and in vendor’s favor. Further, with the help of a lawyer, the associations could draft a standard template for vendor-reseller contracts and ask vendors to follow it.
A partnership is a two-way street, and the contracts which vendors and resellers sign between them need to be bilateral in spirit.
So before you sign your next contract, don’t forget to read every word of it and understand your legal liabilities under the contract. |