Parties to the Contract and the Power of Authorized Partners

[SoftRab]

What's happening between you and your distributor that's causing you to ask this question now, when it's probably too late to do anything about it?

What we are concerned about is 2 potential issue that as we think might arise:

1) The contract does not explicitly says that it binds third-parties (through the distributor) to the contract. Another words, it has nothing about whether distributor can act through other legal entities (partners, affiliates etc) or not, and the terms, except it only says Company 2 (together with its authorized partners and affiliates - «Distributor»)" in the "Parties to the contract" section;

2) The split in money. The contract says the distributor would pay, say, 70% from sales. An affiliates (authorized partner) also withholds its commission, say 10% from its sales, so what is the final amount distributor would pay to the developer? There is no mention in the contract about that. What it actually says is the following:

Distributor will pay to Software Developer 70% from Gross Sales;

Gross Sales definition - all monies attributable to Developer's software product derived from Sales and actually received by Distributor, before deducting any sales processing fees but after deducting any fees and expenses associated with distribution activities, and taxes and fees that Distributor will collect and remit to the proper authorities, where Distributor is legally required to do so: any sales tax, value-added-tax, goods and service tax, or similar tax or government fee.

So if an affiliate makes a sale - $100, retains its commission of $10 and then pays $90 to the distributor, what is the amount the distributor should pay to the developer: 70% x $100 or 70% x $90?

Thank you!

[llworking]

Thank you all for your responses, very much appreciated. Unfortunately, I can't provide full details of the contract, however let me specify please:

The contract is actually between 2 parties - Software Developer and its Online Distributor. There is no any mention of Distributor's affiliates (authorized partners) in the agreement and how they would act. The only mention is in the "Parties to the contract" section as I specified in the very first post above (together with its authorized partners and affiliates - «Distributor»).

So can the distributor assign other sub-distributors to sell software products (at least within the same terms of the agreement as if it were the distributor itself)?

Thanks.

Without knowing the total details of your contract I can only tell you that generally that would be the case. Generally a distributer would sell to a lower tier of retailers (or in this case etailers). Generally a distributor does not sell to the end user. There are some exceptions to that, particularly online, but that is the general scenario.

Ok, this is again, generally how such things work:

The distributor sells a product for $100.00 and gives you (in this case) $70. He pays his expenses (including any commissions to others) out of his $30.00. The etailer who bought this product from the distributor would mark up that same product to maybe $140.00 (maybe more) before selling it to a consumer (and would pay his expenses, including commissions out of his remaining $40).

The way you were describing things sounds more like a Sales Agent or Sales Representative rather than a distributor. However even that scenario they would make a flat sale to a retailer.