In Short
- Collaboration agreements establish the framework for businesses partnering on a project, detailing roles and responsibilities.
- They include terms on contributions, profit sharing, and intellectual property rights.
- Such agreements help prevent misunderstandings and ensure all parties are aligned with project goals and expectations.
Tips for Businesses
When drafting a collaboration agreement, clearly define each party’s roles, responsibilities, and contributions to avoid conflicts. Address key issues such as profit sharing, intellectual property rights, and dispute resolution. Regularly review and update the agreement to accommodate any changes in the project or partnership.
Are you wanting to embark on a new project but do not quite have the expertise to make it happen? Is there another party you could work with who would also benefit from their participation in this project? You may want to consider approaching the other party with the idea of collaborating together on the project. By collaborating with another business, you can leverage their expertise as well as their customers whilst allowing them to do the same, and thus forming, what is hopefully a mutually beneficial relationship. This article will explain what a collaboration agreement is, and what you should consider when drafting your collaboration agreement.
What is a Collaboration Agreement?
You should enter into a collaboration agreement when partnering with another party to work together on a project intended to be mutually beneficial. Examples of situations where you should consider entering into a collaboration agreement include when you are:
- working with another business to develop a new product together; or
- partnering with an institute to conduct research together.
What Should You Include in Your Collaboration Agreement?
Collaboration agreements serve a dual purpose in business relationships. On one hand, they often function as non-binding statements of intention, allowing parties to formally express their interest in a venture without incurring legal obligations. On the other hand, these agreements can include legally binding terms, either in part or in their entirety.
As well as the nature of the arrangement, your collaboration agreement should clearly set out the key details of the engagement. Ideally, it should contain as much detail as possible, to avoid any confusion or ambiguity later down the track. Below are some key provisions to consider.
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Services
- What is each party bringing to the table?
- What services must each party provide in order for the collaboration to be successful?
Purpose
- Why are the parties collaborating?
- What has prompted this collaboration and what is the end goal?
Term and Termination
- What is the intended duration of the collaboration?
- Will you continue it until you achieve the purpose?
- Will either party be able to terminate if progress is too slow or the arrangement is no longer mutually beneficial?
Costs
- Who will be responsible for funding the project?
- Will each party be responsible for their own costs, or will one party bear the financial cost?
Intellectual Property
You should consider how you will share intellectual property in a collaboration agreement.
- What intellectual property is each party bringing to the project?
- Who will retain ownership of that existing intellectual property?
- What new intellectual property are you creating as a result of the project?
- Who will retain ownership of that new intellectual property?
Commercialisation
- What happens following the completion of the collaboration?
- If you create a product as a result of the collaboration, will you commercialise it?
- Who will be responsible for the commercialisation process?
- Will both parties earn a share in the profit, or will one party own the output?
Confidentiality
- What are each party’s obligations in relation to retaining the confidentiality of the project?
- How long do these confidentiality obligations last?
Is There Consideration?
In order to have a legally binding agreement, the agreement must have consideration. Usually, consideration takes the form of monetary value being exchanged for the services. However, this may not be the case in a collaboration arrangement where both parties are providing services without receiving payment in exchange. In this situation, the mutual exchange of services is likely to be the consideration underpinning the agreement. However, the agreement needs to be carefully drafted to ensure this is made clear.
If you cannot clearly establish consideration, consider drafting your document as a deed instead of an agreement since a deed does not require consideration to be legally binding. It does, however, have additional signing requirements. You can learn more about the differences between an agreement and a deed here.
Key Takeaways
Partnering with another business can allow you to leverage their expertise and reach when embarking on new projects. By doing so, you can establish strong commercial relationships whilst hopefully growing your business and your own reputation. Before embarking on such a partnership, clearly set out the details of the relationship in a collaboration agreement to ensure both parties know exactly what is expected of them. It is also important that your collaboration agreement sets out what will happen at the expiry of the agreement, to avoid any misunderstandings or surprises at the end of the project.
If you need help drafting a collaboration agreement, our experienced contract lawyers can assist as part of our LegalVision membership. For a low monthly fee, you will have unlimited access to lawyers to answer your questions and draft and review your documents. Call us today on 1300 544 755 or visit our membership page.
Frequently Asked Questions
A collaboration agreement is a legally binding document that should be entered into when two or more parties want to cooperate together or work collaboratively for a mutual purpose and benefit.
Your collaboration agreement clearly sets out what is expected of each party in the relationship. It should also set out what happens when the project is over, so that there are no surprises or misunderstandings.
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