Shameless Self-Promotion of My Future Events
Sorry, this Draw the Law will be very brief. It is a very busy week, as at the state Legislature it is Conference time, which means the House and the Senate sit down to hammer out compromises for the bills. Basically, this is one of the last hurdles for a bill to become enacted into a law. If it does not get out of Conference, it is dead. Therefore, I am watching and tracking legislation so that over the summer I will be resuming Law in the Brief, where I will update you on new laws that affect your business.
In addition, I as an Oahu Director for the Young Lawyers Division (YLD) of the Hawaii State Bar Association (HSBA), I am charged as a co-chair of Law Week, next week (April 30th – May 5th). Law Week is a focus on the legal profession and a time for many lawyers to do outreach to the community, as such the YLD will be taking to the KHON2 Actionline phone lines during the weekdays of Monday – Friday next week. Look for more information on my blog and the HSBA website. Secondly, we will also be setting up free legal clinics throughout the state. See the flyer below to see for further information.
Draw the Law: Marketing or Reseller Agreements
Today’s Draw the Law is the beginning of a several posts where I talk about various types of agreements that a business owner will contemplate using. As a transaction and compliance attorney, I am asked to look over documents. Many of these documents are templates from the Web, which are not necessarily bad, however they sometimes are not written in the favor of the person who wants to use them.
One aspect you need to understand of contract drafting is that while there are many laws that protect consumers from unfair business practices in contracts, in the realm of B2B there are fewer protections. If you sign it, you cannot argue you didn’t know about it; I know many small business and startup owners who still operate as if they are consumer because they have been used to just going to a store an accepting the store policy. This is not the case: you are a business negotiating with a larger business. So you really should have an attorney go through contracts to make sure they are in your interest/favor or fair to the parties involved.
So let’s get to an agreement that usually benefits a small business trying to grow, a marketing or reseller agreement. Let’s say you make an awesome product . . . but you are stuck on an island in the middle of the Pacific. However, Chinese and Midwestern tourists love your product, and you think that it would do well in those areas. What do you do?
You could build a presence in those locations. However, building brick-and-mortar is expensive, and then there are labor costs if you need to staff the store. Online retailing is a possibility, but let’s say your product needs a salesperson to explain how awesome it is and why customers need to buy it.
Supposing you know a distributor or a massive retailer that wants to carry your line of products, this is where a marketing or reseller agreement steps in. Basically, this agreement allows them to sell your product (or service) for a fee. They get access to your stuff, and your stuff gets exposed to a larger market. Now, this is where a business sense and lawyering meet, negotiations.
Consider the Following: Negotiate Provisions, Do Not Accept What is Placed in Front of You
Remember I said that B2B contracts have fewer protections for the small business than consumers have in a B2C situation. Therefore, if you are a small business owner, but you know your product or service is awesome you have to leverage that to push on certain clauses. Here are some clauses you might want to think about when negotiating a marketing agreement:
- If there is a dispute under the agreement, where will it be resolved? - I discussed this concept in a Boilerplate Blurb post.
- Can the company that is reselling your goods sell competing goods? - Think cereal aisle at the supermarket.
- Does the resellers salespeople needs special training to sell your goods? Do you have to pay for that? - Consider that if your item is awesome it will bring people into the store, but if it is complex or a hard sell it takes up valuable space.
These are only a sliver of things that need to be discussed, while many large companies will try to force a small business desperately trying to grow do not sign their contract without understanding what it entails. You can always ask them to clarify a clause that you don’t understand or you would like to know how it operates in practice. At the very least you know what you are getting into before rather than after. Finally, if you push back you may get favorable language inserted into the agreement or a compromise.
See you next week!
*Disclaimer: This post discusses general legal issues, but does not constitute legal advice in any respect. No reader should act or refrain from acting based on information contained herein without seeking the advice of counsel in the relevant jurisdiction. Ryan K. Hew, Attorney At Law, LLLC expressly disclaims all liability in respect to any actions taken or not taken based on the contents of this post.