White-Label Agreement Red Flags: Six Clauses to Check Before You Sign
This page is general information, not legal advice.
A white-label agreement lets you sell someone else's product or service under your own brand. The supplier builds it and you put your name on it, sell it and support the customer relationship. The supplier usually writes the contract, so it often protects their margins and flexibility at the expense of the brand you're building. This page covers six clauses that often move risk onto the reseller. For each one you get an illustrative example, why it matters and wording you can propose. These terms can often be negotiated, and how courts read them varies by jurisdiction.
The example clauses below are illustrative. They are not taken from any real company's agreement.
1. Minimum purchase commitments with penalties
A typical clause might read: "Reseller shall purchase no less than the Minimum Annual Volume set out in Schedule A. If Reseller fails to meet the Minimum Annual Volume, Reseller shall pay the difference at the then-current price."
Why it works against you
Minimums turn a sales opportunity into a fixed debt. If demand is slower than expected, you pay for products you never sold. When the shortfall is billed at the "then-current price," the supplier can raise that price and make the penalty bigger. Some agreements also let the supplier end exclusivity or terminate the deal after one missed target.
What to ask for instead
Sample wording to propose: "Minimum volumes apply from the second contract year and are reviewed in good faith each year. If Reseller misses a minimum, Supplier's only remedy is to end exclusivity on 60 days' written notice. No shortfall payment applies."
2. Exclusivity that only binds you
A typical clause might read: "During the Term and for twelve (12) months after, Reseller shall not sell, market or develop any product that competes with the Products. Supplier may supply the Products to any third party."
Why it works against you
You can't work with other suppliers or build your own version, but the supplier can sell the same product to your competitors, sometimes under a different label in your own market. A restriction that runs after the deal ends can stop you from replacing the product at all. Whether post-term restrictions can be enforced depends on where you are. See non-compete clauses explained.
What to ask for instead
Sample wording to propose: "Supplier will not supply the Products or substantially similar products to third parties in the Territory for resale during the Term. Reseller's restriction ends when this Agreement ends."
3. Supplier owns your branding, customizations and customer data
A typical clause might read: "All intellectual property in the Products, including any modifications, designs and materials created for Reseller, and all data generated through use of the Products, belongs to Supplier."
Why it works against you
You might pay for custom features, packaging or brand assets and still not own any of them. If the supplier owns the customer data, it may be able to contact your customers directly or keep the list when you leave. That can make switching suppliers very costly. See IP assignment clauses explained.
What to ask for instead
Sample wording to propose: "Reseller owns its trademarks, brand assets and any customizations it pays for. Reseller owns all end-customer data. Supplier may use that data only to provide the Products and will not solicit Reseller's customers during the Term or for 24 months after."
4. Price changes at the supplier's discretion
A typical clause might read: "Supplier may revise the wholesale price at any time upon notice to Reseller. Revised prices apply to all orders placed after the notice date."
Why it works against you
You set retail prices and sign customer contracts based on your costs. If the supplier can raise prices at any time, your margin can disappear overnight while you're still bound to your own customers and to any minimums. See automatic price increase clauses explained.
What to ask for instead
Sample wording to propose: "Wholesale prices are fixed for each contract year. Any increase requires 90 days' written notice, is capped at the percentage in Schedule A, and lets Reseller terminate without penalty before it takes effect."
5. Termination by the supplier with no transition
A typical clause might read: "Supplier may terminate this Agreement for any reason on thirty (30) days' notice. Upon termination, Reseller shall immediately cease all use of the Products and Supplier materials."
Why it works against you
Your customers know your brand, not the supplier's. If the supplier can walk away at short notice and cut off access immediately, you may be unable to serve customers you've already signed. That can leave you exposed to their complaints and refund claims. See termination for convenience clauses explained, and check auto-renewal clauses for the opposite problem of being locked in.
What to ask for instead
Sample wording to propose: "Either party may terminate for convenience on 180 days' written notice. After termination, Supplier will continue to supply existing customers for a transition period of at least six months and provide reasonable help moving them to a replacement."
6. One-way liability caps and indemnities
A typical clause might read: "Supplier's total liability shall not exceed the fees paid in the preceding three (3) months. Reseller shall indemnify Supplier against all claims arising from the sale or use of the Products."
Why it works against you
Customers will come to you when the product fails, because your name is on it. This wording caps what the supplier owes you at a small amount. It also makes you cover claims caused by the supplier's own defects, safety problems or IP infringement. See limitation of liability clauses explained and indemnification clauses explained.
What to ask for instead
Sample wording to propose: "Supplier will indemnify Reseller against claims arising from defects in the Products, breach of law by Supplier, or infringement of third-party rights by the Products. Liability caps do not apply to these indemnities, to breach of confidentiality, or to gross negligence."
Also worth a look
Check who handles customer support and warranty returns, what quality standards and service levels the supplier promises, and whether the supplier must tell you about changes to ingredients, components or features. Look for audit rights over your sales records, a territory definition that is clear, and where disputes will be decided. A clause that lets the supplier assign the agreement to a competitor without your consent is also worth flagging.
Scan your own agreement free
Every white-label deal is different, and one broad sentence can decide who owns your customers. Upload your agreement to the ScanMyTerms contract review as a PDF, DOCX, TXT or MD file, or photograph it. In about a minute you get the clauses that work against you, with a risk level, the exact wording, why it hurts and how to change it. The free preview needs no sign-up and shows the risk count and the first two findings. The full report is $5. ScanMyTerms does not use your documents to train AI models, and reports are deleted after 7 days.
This page is general information, not legal advice. Contract rules vary by jurisdiction, so before you sign a specific white-label agreement, talk to a qualified commercial lawyer where you do business.
Sources
- All clause examples on this page are illustrative and written for this guide. They are not quoted from any real company's agreement.
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