When you want to create a product with another business, you are entering into a relationship with another business. To avoid disputes and a breakdown of the relationship, each party’s obligations in the creation relationship should be clearly outlined in a legal agreement. This could be a joint venture agreement, development agreement or manufacturing agreement, each of which is briefly explained below. If you are unsure of which agreement is most suitable for you, you should consult with a commercial solicitor.

Joint venture agreement

A joint venture is entered into by two parties who wish to form a strategic alliance with a specific task in mind. This relationship is based on a single business transaction and will last for as long as the task or project does. A joint venture is not a partnership and you do not need to set up a new business entity, accordingly, there is no need for a partnership or shareholders agreement. However, you may wish to seek the assistance of a commercial solicitor in the drafting of a relatively simple joint venture agreement to ensure that each party is clear on their rights and obligations. Unlike a partnership, profits are not assumed to be equally shared between the parties to a joint venture agreement; therefore it is extremely important that the agreement clearly covers how profits from the created product will be split between you and the other business.

Development agreement

If the product you are creating is an application or software, one of your options is to enter into a development agreement. The development agreement should clearly set out what each party is bringing to the relationship, e.g. one party might be bringing the idea and designs, and the other party is providing the means and labour to create the ideas and designs. The agreement needs to state how money will flow between the parties, what rights each party has to the intellectual property and end product, and what obligations each party has to each other and in relation to the final product. When you are having an application or software developed, the intellectual property is one of the most valuable assets, and you need to ensure that all rights, title and interest in any intellectual property that you provide remain with you, and if appropriate, that all rights, title and interest in the intellectual property of the final product should also be assigned to you.

Manufacturing agreement

If you have the idea for the product and you merely want to engage the services of another business to manufacture the product, then you can enter into a manufacturing agreement. This agreement will need to detail what services are being provided to you, expected quality of the final product, set quantities and whether or not there are any particular deadlines which must be met. If the product you are creating has certain legal requirements which must be met, to impose these obligations on the manufacturer, they will also need to be addressed in the agreement.

To conclude

If there are specific concerns which need to be addressed which relate to your business relationship or product, you should consult with a commercial solicitor. A good commercial solicitor will be able to assist you in preparing solid the necessary documents for a strong legal foundation for the business relationship and can also provide advice to ensure that your product meets the necessary legal standards from creation through to marketing and sales.

Lachlan McKnight
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