This article is written by Labony Ray, pursuing Diploma in Advanced Contract Drafting, Negotiation, and Dispute Resolution from LawSikho. The article has been edited by Zigishu Singh (Associate, LawSikho) and Smriti Katiyar (Associate, LawSikho).
Initiation of any business requires an agreement or a contract. Written documents are more favourable when it comes to any business transaction. Contracts or agreements act as a backbone to both parties. If any unfavourable situation arises in future, a contract gives the power to sue and to be sued. A Contract gives legality to any transaction. As per Section 2(e) of the Contract Act, every promise or a set of promises which form the consideration for each other is an agreement. Section 10 of the Indian Contract Act 1872 enumerates the essentials of a valid contract whereby parties following the section creates a legal relationship between them. There is always a consideration involved in every contract. Without any consideration, a contract does not stand valid.
All business transactions are not similar. The clauses differ in each agreement and contract. To draft any contract for a business one should have an essence of:
1. Free consent of the parties.
2. Legal relationship.
3. Competency of the parties.
4. Consensus ad idem.
6. Lawful object.
7. Not declared void.
8. Possibility of performance.
9. Offer and acceptance.
10. Legal formalities.
All the contracts must fulfil the criteria as mentioned in the above points. Getting stuck on a standard format of the contract will always end with loopholes and complications. The clauses must be strict and effective. One such agreement is the clinical research service agreement (CRSA) which needs much attention while drafting as a lot of factors must be kept in mind while drafting them.
What is a clinical research agreement?
A clinical research service agreement (CRSA) is a legally binding agreement between the Sponsor and Academic Institution or an organization that will carry out the clinical research, Clinical Trial or Study. This type of agreement can be initiated by a Sponsor or the Academic Institution. It is important to understand the role of two parties in the agreement in order to understand what CRSA is all about.
What is the role of a sponsor?
The sponsor of the agreement is a party who will be engaged in the development, manufacture, distribution, and sale of pharmaceutical products. For example, a pharmaceutical company that is a sponsor to a CRSA usually funds clinical trial projects to study drugs and devices and take on the important role of assuring the safety of the product and will also be responsible for manufacturing, distribution, and sale of the product.
What is the role of an academic institution?
An academic institution is an organization that will carry out clinical research, clinical trials or studies on a particular product and be engaged in managing clinical research programs.
Let’s take the instance of the Vaccination Covishield. Covishield was produced by the Serum Institute of India (SII) and developed by AstraZeneca and Oxford University. So, here Serum Institute of India (SII) is the Organization that has carried out the research and AstraZeneca and Oxford University is the Sponsor.
Clauses to the agreement
Contract negotiation is highly dependent on the clauses of the agreement. During the contract negotiation sponsors and Research Institution must focus on securing acceptable clauses as high-risk factors are involved in such agreements:
Research subject and services to be provided by the parties
As this is the foremost section of the agreement or contract, the exact description of the research and what role the parties are having should be mentioned with a clear cut explanation. This will help to understand the subject matter of the research project. This will also give clarity to both parties in the agreement.
Compensation and payment
It may be decided between the parties, the total costs for Services performed with respect to a particular Project Addendum that shall not exceed the figure for total project costs. Basically, the sponsor is responsible for all reasonable, necessary out-of-pocket expenses incurred in connection with the performance of the Services with respect to a Project in accordance with this Agreement and the applicable Project Addendum. This section must clearly state that:
- On completing the milestone the payment has to be made by the sponsor.
- What is the additional cost incurred by the research institution, the sponsor shall reimburse the same against invoices.
- In what cases does the research organization need to send invoices.
- In what other situation the sponsor will not make payment.
Responsibilities of sponsor and research organization
This clause must clearly state the responsibilities of the parties.
The basic responsibility of Research organization includes:
- To conduct research.
- To get compensated for the work or research work.
- Secure appropriate authorization to carry out the research.
- Must comply with the study protocol, government laws and regulatory system of the country.
- Must be for the welfare of society.
- Research must be conducted by well-qualified physicians and scientists.
- As a sponsor is responsible for the development, manufacture, distribution, and sale, the basic responsibility of the sponsor includes:
- To provide funds to the research organization to conduct the study.
- To get approval from the regulatory body.
- To notify the appropriate body and get permission for the trial or sale.
- To comply with the governing law of the country.
The clause relating to confidentiality in most of the agreements has its own significance. In this agreement, in what way sponsors and research organizations can maintain their confidentiality?
During the terms of the agreement, the sponsor agrees to hold all confidential or proprietary information confidential commercial, scientific, medical and technical information relating to the research organization and its study in strict trust and confidence.
The research organization must hold all information obtained from the sponsor, whether in oral or written form or generated or created as a result of performing the services under this agreement, including, without limitation, all commercial, scientific, medical and technical information and data relating to Sponsor.
Intellectual property (IP)
IP is a very important clause to be drafted with utmost caution. IP rights of creation are connected with the following:
- Patent: Exclude others from making, using, offering for sale or selling one’s invention in the market.
- Copyright: Gives the sponsor absolute right to make copies of, distribute, adapt, perform and/or display the creation.
- Trade secret: Trade secrets must be handled with care by inventors as the information usually has high economic value, therefore reasonable measures must be taken by the parties.
Both the parties to the agreement shall indemnify for any and all damages, costs, expenses and other liabilities, including reasonable attorney’s fees and court costs, incurred in connection with any third party claim, action or proceeding under the agreement or any project addendum.
Provided, both the parties shall have no obligation if it fails to follow the protocol or sells personal health information (PHI) to a third party.
Conflict and dispute resolution
If any issue escalates between the parties then an attempt will be made to resolve them through mutual resolution through Arbitration and mediation.
Inspection and record-keeping
During drafting the terms of the agreement, the research organization shall maintain all materials and all other data obtained or generated in the course of providing the services hereunder, including all computerized records and files, in a secure area reasonably protected from fire, theft and destruction. Additionally, this section includes other agreements, such as the sponsor’s right to audit, inspect or verify data on a regular basis, and the research organization’s responsibility to cooperate with the sponsor or a regulatory agency.
The agreement or contract shall govern by a governing law chosen by the parties. By their choice, the parties can select the law applicable to the whole or to only part of the contract. The parties may at any time agree to subject the contract to a law other than that which previously governed it.
Terms and termination
The term in the agreement or contract refers to the period of time i.e for how many years the agreement or contract is valid. Till the time the agreement is valid, the research organization has to provide service and information about the progress to the sponsor from time to time.
As CRSA is a project-based contract between the parties and creation aides to the welfare of the society, the termination must be reasonable. The parties can terminate is any parties to the agreement does :
- Breach of contract,
- Does not comply with the regulatory body of the country,
- Leaks any confidential information,
- Without prior notice or information to change business strategy.
Force majeure means unforeseeable circumstances that prevent someone from fulfilling a contract. The clause in any agreement or contract runs as follows:
“In the event, either Party shall be delayed or hindered in or prevented from the performance of any act required hereunder by reasons of the strike, lockouts, labour troubles, restrictive government regulations, riots, insurrection, war, Acts of God, inclement weather or other regulatory reason or cause beyond such Party’s control, the performance of such act shall be excused for the period of such delay. Any timelines affected by such force majeure shall be extended for a period equal to that of the delay and any affected Study budgets shall be adjusted as appropriate to reflect increases or decreases in costs. Notice of the start and stop of any such force majeure shall be provided to the other Party.”
This clause hinders the service provider to assign in any situation whatsoever the duties, services which he needs to perform as per the term of this agreement to another person without the prior approval of the sponsor.
If any clause or provision be found to be illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby, provided the surviving agreement materially comports with the Parties’ original intent.
This clause states that any notice which is required to be given as per the service agreement shall be delivered in writing and delivered to the party to whom it is addressed in person or by registered mail.
Amendment of contract
For the reason of force majeure, unexpected and new situations are expected to arise. Every business protocol changes according to the circumstances. Therefore at that point in time, amendment or novation of contract is necessary.
A lot of attention must be paid while drafting the CSRA, This is not a contract like rent agreements or conveyance agreements. One can add more clauses according to the parties demands, but one should keep in mind that these kinds of agreements or contracts are project-based and involve a creation for the welfare of the society. Clauses must be drafted keeping in mind the compliances, regulations, limitations and terms.
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