Collaboration Agreement: Legal Tips

Written by Wesley Henderson

February 22, 2023

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There are plenty of reasons why businesses would want to create a collaboration agreement. This useful document can be used to record everything that’s agreed upon into a more tangible file that you can go back to and reference if the need arises. In this blog post, we discuss how a company can use collaboration agreements to help grow its business and achieve its goals.

What Are Collaboration Agreements?

As a legally binding agreement, a collaboration agreement serves to document details between two parties or businesses that wish to work together on a project. By making a formal record of the project they want to collaborate on, they can clearly outline how obligations and responsibilities are divided and specify who owns what. It also serves to ensure that both parties know the steps to take if anything goes wrong or if someone wants to raise a dispute.

What Should a Collaboration Agreement Contain?

Collaboration agreements may be as complex or simple as you need, but they should always be made specifically to cater to your business needs and have the most important details of your collaboration, such as:

  • The name and description of your project
  • A schedule for your collaboration
  • How both parties will work to achieve the goal
  • How benefits will be shared among both parties
  • The obligations and responsibilities of both parties
  • Intellectual property rights
  • Non-solicitation agreement
  • A confidentiality clause and nondisclosure agreement
  • Dispute resolution clauses
  • Termination clauses

Your collaboration agreement should cover important details of the project along with the resources needed to achieve it. It should highlight when work on the project will begin and when it will end. You may include goals and milestones to measure your progress. You may also include details to clarify what each party needs to do to achieve their goals; by making your expectations clear, both parties can get along much better throughout the project.

Are Collaboration Agreements Necessary?

While they aren’t required in a legal compliance aspect, they are highly recommended. Because you’re investing your money and time toward a collaborative project, you can’t rely solely on verbal reassurance. Having this agreement in place will ensure that you get results instead of ending up with a dispute on your commercial contract.

Taking the time to draft an agreement provides you with a way to manage the risks involved in case the collaboration fails to go according to plan. Without a documented agreement, you could accidentally create a partnership with the other party even if you don’t mean to. This can be particularly troublesome, especially if you become liable for injury or damage caused by the other party — even if you aren’t responsible.

If you fail to create a written collaboration agreement, you might find it harder to hold the other party responsible should they fail to deliver on their half of the project. The court may find that you have a verbal contract and apply contract law to your agreement instead and interpret this contract themselves. Unfortunately, without a written agreement, it will be harder to prove each party’s intentions when they first entered the terms of the collaboration.

Parts of a Collaboration Agreement

A collaboration agreement is used in a wide range of business enterprises and is commonly used in projects between two or more parties that aim to reach a common goal. Within a collaboration agreement, you’ll usually find the following terms.

Details of the Project

The details of your project need to be included in the agreement and should specify the contribution to be provided by every party during the collaboration. The details should outline the project’s parameters, explain everything clearly, and minimize the risk of having disputes further into the project. Because your goals and needs may change as you progress, it may help you to include a review clause that will let you amend details as needed.

Collaboration Schedule

The main body of your agreement should contain the term of the collaboration. This can be an ongoing term to be eliminated by a party or a fixed time period. Your schedule may also include a timeline that highlights your project’s key deliverables.

Project Management and Reporting

The key to a successful collaboration lies in strong communication. As such, the agreement should detail reporting requirements, meeting schedules, and more. The extent and nature of these requirements should revolve around specific details of the project. For instance, businesses collaborating on a new clothing line will need more time for creative meetings and extensive research reports.

Confidentiality and Exclusivity

Everyone will want to protect their commercially sensitive or confidential details. Including these as part of the collaboration agreement will allow you to create confidentiality provisions and a non-disclosure agreement. It’s important that the agreement is clear on the extent of how much confidential information can be used by the other parties and whether they can do activities that could compete with the project.

Benefits of Creating a Collaboration Agreement

If you’re an individual or have a business and are thinking about entering a temporary partnership to complete a project, creating a collaboration agreement is a good idea. Because it serves to outline the most important and specific details regarding the arrangement, a collaboration agreement provides you the advantage of having everything discussed in a written format. However, there are many more benefits to having a collaboration agreement, including the following.

Clarifies Division of Roles

Some companies can become so caught up with the prospect of working with a bigger or more successful partner that they forget to discuss the roles that each side will play for their new project. Having this in place will provide you with a clear outline of your project’s description and schedule while helping to delegate each party’s responsibilities.

Creating a collaboration agreement will iron out the details regarding roles, listing down the duties and responsibilities that both companies will fulfill. This will help to eliminate confusion and prevent arguments from taking place, like if there are any questions about the contributions made by each party.

Reduces Disputes About Money

Having a well thought out collaboration agreement will also cover details about the entitlements and contributions that each partner has for the business. A collaboration agreement will make it easier to navigate joint ventures, especially when there are different resources being taken from every organization involved.

This document should outline the split of profits between companies, as well as the monetary amount that every party must contribute for startup and daily expenses. Finally, it should define which partner has control over a joint bank account, if there is one. This can prevent financial disagreements.

Provides an Entry Plan

There may be times when you and your partner may need a third company to join the project. Having a collaboration agreement can come in handy in these situations. If you’re working with multiple partners, and they aren’t sure of the new addition to the team, your entry plan can lay down the rules that everyone can agree on for new partners.

Outlines the Exit Plan

Your collaboration agreement can also define the exit plan for everyone, providing a way for one or more partners to leave the project if they wish. A collaboration agreement will include a termination clause that will tell you what to expect when one or more parties stop their contributions.

This will clarify the kind of circumstances that may expel a partner if they aren’t delivering on what was agreed upon. Lastly, it offers a plan of dissolution for the project if those involved agree to end the operations.

What Happens if You Don’t Have a Collaboration Agreement?

Remember that without a collaboration agreement, work from two or more businesses will become shared copyright and no one will be able to use, sell, or distribute the assets or products they make without the permission of all owners. This will protect the interests of the other parties, particularly if they keep going with the original plan to complete the project.

Kinds of Collaboration Agreements

There are different kinds of collaboration agreements that you can draft which can be made specifically for a particular industry and goal. However, customizing your collaboration agreement for your business’ needs will provide protection for the interests of all parties. Below are just a few kinds of collaboration agreements:

  • Business Collaboration Agreement
  • Project Collaboration Agreement
  • Music Collaboration Agreement

Conclusion

Collaboration agreements are extremely important for businesses looking to achieve higher goals or create new projects with the help of others. Without one, the future of these collaborations could be in danger from all kinds of risks, so having an agreement in writing can protect your assets and business if things don’t go according to plan. If you’re looking to get help with drafting a collaboration agreement, visit our contract solicitors at Drafted Legal to get an agreement tailored to your needs.

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