Planning to collaborate with another company, organization, or individual? Begin by compiling a written collaboration agreement. Collaboration involves two or more individuals or entities jointly undertaking an activity to achieve a mutually beneficial objective. A legally binding collaboration agreement outlines the scope of cooperation and the rights and responsibilities of each party. With the signed document, parties go into the cooperation arrangement with clarity and peace of mind, knowing that they have sufficient legal protection. A customizable collaboration agreement template will allow the parties to include details about how they intend to distribute the benefit of their joint project and the mechanisms available for dispute resolution. The parties can also use the template to provide circumstances and procedures for termination of the agreement.
Collaboration Agreement
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Template Description
What Is a Collaboration Agreement?
A collaboration agreement is a legal document that outlines the dynamics of cooperation between two or more entities. For example, a virtual office service company collaborates with a web design agency on web-related services. Prior to the collaboration, the virtual office business could only provide business address, mail handling, call answering, and secretarial services.
The collaboration gives the company a more comprehensive suite of services, including website design and hosting. The expanded service offering immediately increases revenue and eventually increases client retention. Likewise, by accessing the virtual office client pool, the web agency also enjoys increased revenue without additional spending on marketing. The two businesses entered into a collaboration agreement specifying each party’s roles and responsibilities, the joint efforts they’ll pursue, and how they’ll share the benefits.
Parties of the Collaboration Agreement
Parties to a collaboration agreement are the businesses, organizations, government agencies, academic institutions, healthcare providers, community groups, trade associations, or individuals that agree to jointly pursue a common objective. The entities negotiate the terms within the context of not just their unique advantage, expertise, and industry regulations but also unforeseen circumstances that are likely to hinder the fulfillment of their contractual obligations.
With the rise of lean business models, signatories may not have in-house legal capacity to write out the terms of a contract. In such cases, they may find it useful to use a collaboration agreement template that can help speed up the contracting process, access the language necessary for an enforceable contract, and reduce time wasted revising clauses. By relying on a collaboration agreement template, the parties can enjoy open and transparent cooperation, knowing that the document complies with relevant laws, covers the parties’ interests, and fosters a mutually beneficial relationship.
Key Terms
Collaboration agreements sometimes contain complex legal jargon that needs to be interpreted within the context of the association. Some of the most common terms include:
- Non-compete clause — The agreement may contain a non-compete clause prohibiting the parties from competing against each other before, during, and after the collaboration. It may restrict the parties from entering into other partnerships or promoting businesses or activities that compete with the collaborative effort.
- Termination for convenience — Sometimes, it can be in a party’s best interest to terminate the agreement, even if there is no breach of contract by the other party. In such cases, a termination for convenience, known as a mid-contract exit clause, outlines the procedure for contract termination with notice.
- No variations clause — This clause outlines the formalities of varying the written contract. Any verbal agreements made by the parties after signing the contract cannot take effect unless they are adopted as part of the agreement according to the procedure specified in the clause.
- Confidential information clause — With this clause, the parties to a contract assume the responsibility of not disclosing any information, data, or knowledge that holds a business’s competitive advantage or trade secret that should be kept in confidence by the other parties.
- Force majeure — A comprehensive contract anticipates that there may be unforeseeable occurrences beyond the parties’ control that can disrupt the capacity of one or all parties to the contract to fulfill their responsibilities according to the agreement.
Why Is a Collaboration Agreement Important?
A collaboration agreement should be concise and specific to its purpose. When entities attempt to revise service contracts to fit a collaborative context, the altered agreements may not adequately address some aspects unique to a cooperative venture. Failure to use a specific collaboration agreement can expose the parties to financial losses and legal liabilities.
A well-drafted agreement that meets the standards of a legally enforceable contract is important to use because it provides the following:
- Clarity — All parties have clarity in their roles and responsibilities when they use a collaboration agreement template that covers all essential details, such as the scope of collaboration, timelines, expected outcomes, intellectual property management, and revenue-sharing arrangements.
- Legal protection — The agreement protects the parties’ interests and guarantees compensation for an injured party when another party to the contract violates its terms and causes losses.
- Benefit sharing — Since the collaboration is meant to yield certain benefits, a collaboration agreement sample can help the parties plan how they’ll share the benefits and costs fairly and transparently.
- Mitigating risks — By providing certainty in the terms of engagement, a collaboration agreement helps to mitigate the risk of disputes and losses by proactively addressing challenges, clearly communicating roles and responsibilities, and providing procedures for dispute resolution.
- Specifying governing law — A collaborative arrangement may involve people in different states and, therefore, legal jurisdictions. Thus, defining the governing law in the collaboration agreement template clarifies which legal system will apply in the event of disputes or conflicts.
- Addressing indemnity issues, protecting the parties from losses — Collaboration agreements often include an indemnity clause to effectively protect the parties’ interests. The clause outlines the conditions and the extent to which one party will compensate the other for losses, damages, or liabilities incurred due to actions by another party that violate the terms of the contract.
What Should Be Included in the Collaboration Agreement?
For a collaboration agreement to be legally binding, the law requires that it contain the following key provisions:
Scope listing the parties, their specific roles within the context of the activities for collaboration, timelines, outputs, and expected outcomes.
A framework for sharing benefits arising from the cooperation.
The term of the collaboration agreement and mid-contract termination procedures.
An intellectual property (IP) clause that indicates usage, licensing terms, and other details pertaining to IP management.
A confidentiality and non-disclosure clause that prevents the use or disclosure of trade secrets.
The process and channels through which the collaboration agreement signatories can resolve disputes.
How To Write a Collaboration Agreement
A collaboration agreement is a co-creation between parties jointly pursuing a business purpose. The agreement is only relevant to businesses or individuals seeking to create contractual partnerships and retain their independence without creating any new entities. Therefore, it is important that the parties determine if their objectives warrant the use of a collaboration agreement template or another type of contract template. An experienced contract attorney may be able to help make this determination.
To write an agreement that reflects these aspirations, coordinate and develop a schedule for negotiating its important elements. Download an adaptable collaboration agreement template and use the following steps to customize it to suit your unique circumstances.
1. Coordinate With the Counterpart
Having agreed to pursue a collaborative venture, create a discussion schedule during which all stakeholders will be available to meet and discuss the essential elements of the collaboration agreement. For transparency in making data-driven decisions, share the discussion program beforehand and request that each business present relevant company reports and paperwork supporting positions held.
2. Negotiate Essential Terms of the Agreement
During these meetings, encourage open dialogue, ask questions, and explore scenarios around “what happens when” situations. Make no assumptions. Leave nothing to chance. Take time to clarify any ambiguities and refer to a comprehensive collaboration agreement template for guidance on points of discussion, which may include:
Outputs and required timelines
Responsibilities of each party
Ownership of intellectual property
Benefit sharing framework
Scope of the collaboration
Dispute resolution
Termination
A qualified attorney may be able to offer guidance on compliance requirements to align your agreement accordingly, especially if you are in an industry with complex regulatory frameworks.
3. Fill In All the Necessary Information
When the information is ready, download a collaboration agreement template and fill in the necessary information. Include the following details:
The legal names and the principal business address of the parties
Area of collaboration
Duties and obligations of each party
Capital contribution of each party
Profit sharing framework
Names and signatures of the officials
When To Use a Collaboration Agreement
A collaboration agreement is used when two or more parties come together to pursue a mutually beneficial collaborative endeavor through a contractual joint venture. You will know that this type of agreement is relevant to your situation if:
- Both parties seek a strategic alliance to maintain their independence and only be bound by the terms of the contract.
- None of the parties seek to create a separate and new business entity as a result of the collaboration.
- The collaboration is only specific to a project or activity pursued by leveraging the unique strength of each party.
Common Use Cases
Given the outline of the underlying objectives of parties in a collaboration, some of the common scenarios in which a collaboration agreement is useful include:
- Creative collaborations involving two or more artists, musicians, writers, or other creative professionals who wish to collaborate on a creative project.
- Vendor and supplier collaborations that partner to access new markets and streamline supply chains.
- Non-profit organizations that use a collaboration agreement to jointly mobilize resources and leverage their expertise to address community concerns.
- Universities and institutions of learning that collaborate on research projects, knowledge sharing, or exchange programs.
When Not To Use the Collaboration Agreement
Depending on the intentions and objectives of the parties in a venture, there are situations for which a collaboration agreement would not be appropriate. Some of these instances include:
- When businesses seek to merge operations and create a new entity with a new name and governance structure.
- When a business (acquiring entity) seeks to absorb the operations of a smaller enterprise (target company) and have it operate as its subsidiary.
- When two businesses come together as partners and would better represent their aspirations in a partnership agreement rather than a collaboration agreement.
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Frequently Asked Questions
Collaboration agreements and ventures provide a framework through which entities can harness assets and competencies they lack internally. The immediate consequence of creating such alliances is enhanced productivity by exchanging knowledge.
Further, when using a collaboration agreement sample to create a well-drafted document, the contractual partners can optimize workflows, improve operational efficiency, and minimize redundancies. The most attractive benefit of collaboration is the enhanced capacity to solve problems, which leads to innovation that benefits not just the partners in the venture but the community at large.
A collaboration agreement is not exclusive to business activities. Nonprofit organizations, government agencies, academic institutions, and individuals seeking to form contractual alliances with other entities can adapt an agreement to document their objectives and define the parties’ responsibilities. However, there are non-commercial contexts in which parties do not want to work under legally binding contracts. In such situations, a Letter of Intent or Memorandum of Understanding may be more applicable.
Working with a lawyer to create an agreement may be helpful but is not necessary. With the present technological advancements, you can find customizable attorney-reviewed collaboration agreement templates that you can download and use at a fraction of the cost of hiring an attorney to create the document from scratch.
In a collaboration agreement template, the included force majeure clause is designed to release a party from fault and liability in the event that an unpredictable situation hinders the party’s ability to fulfill contractual obligations. For example, a photo booth company signs a collaboration agreement with a live event organizer to promote its booths during concerts and parties. However, political unrest suddenly erupts, making it impossible to organize events successfully. The force majeure clause can protect the event company from liability because the unrest was beyond its control.