Contract Glossary
Revenue Sharing Agreement
Definition
A contract in which two or more parties agree to divide revenue generated from a joint activity, product, or asset according to predetermined percentages or formulas. Rather than a fixed fee, each party's compensation scales with the success of the venture, aligning incentives and sharing both upside and risk.
In Practice
A software company licenses its platform to a reseller with a 70/30 revenue share, the software company gets 70% of each sale, and the reseller keeps 30%. In Q1, the reseller generates $100,000 in sales. The software company receives $70,000 and the reseller keeps $30,000. No minimum guarantees, no caps. If the reseller sells nothing, nobody earns anything. The contract defines 'revenue' precisely, gross revenue before or after refunds, chargebacks, and taxes, because a 1% difference in definition can mean thousands of dollars.
Example Clause
The Parties agree that Net Revenue derived from the sale of the Product shall be shared as follows: [Party A] shall receive seventy percent (70%) and [Party B] shall receive thirty percent (30%). 'Net Revenue' means gross revenue less refunds, chargebacks, sales taxes, and payment processing fees. Revenue shares shall be calculated and distributed within thirty (30) days of the end of each calendar quarter.
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