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Education

Similarly, VARs are not usually familiar with the intricacies
of acquiring relationships, which justifies a direct business
and legal relationship between the ISO and the merchant
Legal ease: as well. In any case, payment network rules oblige an ISO
to disclose its name to merchants and for appropriate
agreements to be in place between the merchant and the
acquiring institution.

Neither the ISO nor the VAR wishes to be liable for acts
ISO and VAR integrations, or omissions of the other party. The legal relationships
between ISO, VAR and merchant should support that
preference. Title in the merchant relationship and each
a legal take party's rights and responsibilities flow directly from the
relevant contracts.

By Adam Atlas Requisite contracts
Attorney at Law The ISO and VAR should ensure that each aspect of their
services is framed within the relationship between them
value-added reseller (VAR) increases the value and their respective relationships with the merchant.
of third-party products by adding custom-
ized products or services to them for resale, • VAR/ISO referral agreement: A VAR either refers
A typically to end-users, as integrated products merchants to an ISO for the ISO to supply merchant
or turnkey solutions. Today, ISOs and VARs are work- services or the ISO refers merchants to the VAR for
ing together more than ever before, so it is an opportune the VAR to supply its services. Naturally, the entity
time to discuss legal issues arising from the relationships making the referrals expects to be compensated for
between them. the referrals.

A typical VAR-ISO integration This agreement must also contemplate a scenario
A VAR, for example, could be the provider of a data and where one or the other entity stops serving the
information management platform for veterinarians. merchant. If the VAR stops serving the merchant,
Inevitably, the VAR will wish to establish a connection the ISO may have a legitimate right to serve the
between its own platform and payments made to merchant through integrating with a substitute
veterinary clinics so that veterinarians won't need to log VAR. Conversely, if the ISO stops serving the mer-
into multiple systems to manage appointments, services chant, the VAR should be able to integrate with an-
provided, inventory and payments. other ISO so as to ensure continuous service to the
merchant.
The VAR will realize that to access merchant payment The agreement should plan for the realistic possi-
information, it must integrate with the ISO, gateway or bility that one or the other will have to step away
acquirer that facilitates payment acceptance for the clinic. from the merchant at some point; it benefits neither
ISOs are the natural point of connection between VARs to harm the merchant should disruption occur.
and payment data.
Title in merchant relationship • ISO merchant agreement: The merchant process-
ing agreement put in place alongside a VAR rela-
Both the VAR and the ISO have a legitimate an independent tionship need not be different from the ISO's stan-
interest in the merchant relationship. The ISO has an dard merchant processing agreement. VARs are re-
interest in the merchant because it establishes the payment luctant to use an ISO's name and must be educated
acquiring relationship that produces residuals, which are in the payment network rules mandating the dis-
the principal form of revenue for the ISO. The VAR is in the closure of the ISO name to merchants during the
business of supplying its own platform and depends on its solicitation process and throughout the merchant
own relationship with the merchant for that purpose. processing relationship.
• VAR merchant agreement: The VAR merchant
Inevitably, one or the other will be the first to establish agreement sets out the terms by which the VAR
a relationship with the merchant. The entity that first
approaches the merchant usually believes itself to be supplies its services to the merchant. The ISO
should not be a party to this agreement so the ISO
owner of the greater relationship with the merchant.
However, most ISOs are not, for instance, in the business can reduce the chances of being found liable for
acts or omissions of the VAR.
of selling veterinary software. This exemplifies the
legitimate need for the VAR to have some direct business
and legal relationship with the merchant.
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