This article has been written by Mohd Aman Khan Afghani, pursuing a Diploma in Advanced Contract Drafting, Negotiation and Dispute Resolution from LawSikho.

Introduction

As we all know that in today’s business environment branding plays a very important role. It is the goodwill or reputation of the brand only which bears fruit for any business in the form of profits. Branding plays a very important role in the success of any business.

Normally entrepreneurs manufacture their own products under their brand name and this thing in some exceptional cases do create problems and therefore in some of those special cases, the Entrepreneurs sell the products which are manufactured by other companies. So this has been developed as a concept over time in which retailers sell products manufactured by other companies.

So “White Label Agreement” can be understood as machinery that involves the manufacturing of goods or services by a different company and the use of these products by different companies under its own brand. This White label strategy is mostly used in the production of foods, electronics and software etc.

The White Label Agreement could be understood as a concept in which the production of goods and services is done by one company and these goods and services so produced is being sold by another company under its own brand name and Trademark.

This White Label Agreement is widely used as a strategy in many companies which are involved in the production of electronics, software developers and the one related to food.

As we move more in-depth in understanding how White Label Agreement works, we should lay emphasis on e-Commerce, as White Label Agreements are mostly used in this. E-Commerce is completely a new dimension in the world of business and it completely overcomes all the barriers which are created by international frontiers and other Policy related obstacles and as a result businesses across borders have been facilitated. It is because of e-commerce only now companies have expanded their reach to more markets of different countries than it would have been without it.

Need for White Label Agreement 

So basically White Label Agreement is an Agreement/Contract between a seller and the manufacturer.  The above contract or agreement governs the process of production of the manufacturer and also sets out the terms and conditions for the reseller under which he may brand the products manufactured by the manufacturer. White Label Agreement is a very important tool to secure business deals.

Things that can be included in the White Labelling Agreements

1. Product warranties: In the agreement, it should be clearly stated that the supplier of goods should provide the goods without defects and of appropriate acceptable quality. It has to be ensured that the goods are fit for the purpose it is bought, it should be ensured that the goods are in no way of hazardous nature, and it has also be ensured that the party supplying the goods should in no way infringe the rights of any person including the rights related to intellectual property and other related rights.
2. Regarding partnership: It should be stated in the Agreement that the parties to the agreement are not partners or joint venturers in any way.
3. Exclusivity: it should be clearly stated in the Agreement that the supplier of goods can exclusively provide the goods to the retailer or can provide to any other person or firms also.
4. Pertaining to Intellectual Property Rights: It should be clearly stated in the Agreement that whether the supplier will provide the License to the retailer to sell his products or will the retailer can buy the products according to his will. It shall also keep in mind that the retailer’s trademark, copyright etc.
5. Allocation of the liability: White Labelling Agreement also governs the liability of the manufacturer and the reseller. If in case any product is found to be defective then how the liability will be fixed should be there in the White labelling Agreement.
6. Pertaining to solicitation: White Label Agreement shall also contain a Clause pertaining to Non-Solicitation.

What can be done with the help of a White Label Agreement?

So basically White Label Agreement is a contract between a manufacturer and the reseller wherein the production by the manufacturer is governed and the appropriate control over the reseller is being governed. White Labelling Agreements contains provisions that deal with the following:

• White Labelling Agreement governs the specifications of the products and contains provisions with respect to that.
• It contains the provisions related to the production by the manufacturer.
• Provisions related to the paperwork and documentation with respect to the products are also contained in the White Labelling Agreement.
• Provisions related to the warranties with respect to the products are also there in the White Labelling Agreement.
• Provisions related to customer services are also there in the Agreement.
• Provisions related related to the ordering and pricing of the products are also there in the White Labelling Agreements.
• Provisions to govern the Intellectual Property like provisions related to the ownership of the Intellectual Property rights, provisions related to the licensing of the Intellectual Property rights, provisions specifically related to the trademarks, copyright, patents etc.
• Provisions with respect to repair services are also there in the White Label Agreement.
• Schedules are also there in the white Labelling Agreements which sets out the details of different things.

The White Label Agreement contains the standard clauses which are contained in any Contract like the Parties Clause, Definition and Interpretation Clause, Nature of Contract Clause, Specification of the Products Clause, Clause related to the Application of the Branding, Clause pertaining to the manufacturing, Clause relating to the Standards to be followed while doing Business, Clause related to the Quality control, Clause related to the packaging of the Products, Clause related to the rejection of Goods by the Resellers and the return of goods by the reseller in case the goods are not of acceptable quality, clause related to the Orders, Clause related to the End-user documentation and other documentations, Clause related to the Order cancellation, Clause related to the price and payment, Clause related to the riska which are involved and with respect to the retention of the title, Clause related to the Intellectual property rights of both the reseller and the manufacturer, Clauses related to the support for the customers, Repairs related clauses, Clauses related to the warranties and guarantees given by both the manufacturers and the resellers, clauses related to the marketing materials and services, clauses related to division of profits between the parties, clauses related to the obligations of the manufacturers and the Resellers, Clauses stating the warranties and representations of the manufacturer and the resellers, clauses related to the indemnity, confidentiality, etc, clauses related to the term and acts which may result in the termination of the contract, clauses related to the notice to be given to the either parties, clauses related to the Force Majeure, clause related to the waiver, severance and also the clauses related to the steps to be taken in case of any dispute arises and clause related to the jurisdiction.  The White Labelling agreement shall also contain schedules with respect to the products, their branding, production and quality control, the process of production, packaging, documents, price, warranties, etc.

Advantages and disadvantages of White Labelling Agreement

The advantages and disadvantages attached to White Labelling Agreements are:

• The White Labelling Agreement gives an edge or a push to the reseller in the new market and to take a launch in any market and also to minimise his own cost in connection with the production or manufacturing of the products, the reseller can lay emphasis on his main business and can earn extra profit from such partnership program without investing a hefty amount in developing and starting a new range of products. but there is also a disadvantage which is that the reseller cannot interfere or interrupt the production process as all the required R&D parts are under the sphere of the manufacturer authority.
• On the other hand, the manufacturer can also sell his manufactured products and his services without incurring additional costs of promotion and advertisement, which he might have to incur if he would be selling his products and services directly in the market. This White Labelling agreement would also help the manufacturer to expand the spectrum of customers of goods and services to be produced by him. 
• The thing is that when the goodwill will be earned then it will be both for the manufacturer and the reseller as the reputation of both manufacturer and the reseller will go up in the market and it may be a little disadvantageous to the manufacturer. Even the final customers cannot approach the manufacturer with respect to the manufacturer’s products as the customer contacts would be looking after by the reseller would also be a little disadvantageous, and the manufacturer would also be required to sell his products and services to the reseller at lower prices in comparison to the price he would get if he would sell his products directly in the market.

Conclusion

It can be said that White Labelling Agreement is an agreement that acts as a facilitator for both the manufacturer and Reseller/Retailer, as it helps the manufacturer to sell easily sell his products in the market without taking all the burden of advertisement and promotion and facilitates the Reseller/Retailer to sell the products in the market under its brand name without actually manufacturing or producing them which saves their cost and also save them from the burden involved in the production process. So it is a tool which can help both the manufacturer and the retailer.

References

1. https://www.agplaw.com/white-label-agreement-in-simple-terms/.
2. https://www.upcounsel.com/white-label-agreement.
3. https://www.upcounsel.com/white-label-agreement.
4. https://progressivelegal.com.au/commercial/white-label-agreement/.

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