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This article has been written by Preeti Bhandari, pursuing the Diploma Programme in Advanced Contract Drafting, Negotiation and Dispute Resolution from LawSikho.

Collaborative Service Agreement and its Requirement

A Collaborative Service Agreement is an agreement between the parties to govern their relationship wherein they have come together for providing services in lieu of consideration.

The agreement for services simplifies the relationship by defining the scope of services, duration of services, payment and manner of resolution of disputes between the parties.

A service agreement drafted carefully prevents dispute between the parties and provides a framework within which they have to work for a common objective. The requirement of executing a written agreement puts on parties the responsibility of discussing key elements with clarity to avoid missing on the important and crucial facts.

Important terms to be covered under Collaborative Service Agreement

Party Details

The details of the parties who are coming together to execute an agreement is the first step in the drafting of an agreement. The details about the parties should very clearly describe the parties whether they are an individual, firm or company. The description of parties is important as it will help to understand the liabilities on the parties and their impact.

Purpose 

The purpose of the Agreement defines the objective with which the parties have agreed to come together. It defines what the parties want to achieve by coming together and why their association is required. Without a goal the agreement will be an aimless document and parties will not be clear as to the objective. The same should be clearly defined in the agreement to keep the focus of parties maintained.

Scope of Work

Scope of Work provides the activities which the party providing the services is required to do to achieve the purpose. It defines the method and actions to be taken for reaching the goal. It also defines the responsibilities between the parties for completing the task.

Scope of work is the most important and critical section in an agreement as without having a clear understanding of responsibilities, the parties may not be able to achieve the objective for which they have come together.

Term, Renewal and Termination

Term – As the saying goes a goal is achieved by doing the right work at the right amount of time, it is important to have the timeframe and benchmark for the work defined in the scope. One of the primary aspects of an agreement is to have well-defined timelines. The agreement should build in the time frames and benchmarks. 

Defining timelines help to measure the progress of the work and to identify problems if any in completing the work and taking corrective actions for meeting the deadlines.

The Parties should as well specify the duration of the agreement and when the same will be terminated between the parties. The clause should contain the grounds and remedies at the disposal of the parties to come out of the agreement if they find it difficult to continue with the agreement,

Renewal – The Service Agreement should as well have an option to renew the agreement if the party availing the services is satisfied with the services being offered.

Termination – All agreements should have a specific date upon which the cooperation ends. Termination clauses in an agreement stipulate when and under what conditions each party may choose to terminate the agreement before the end date.  

Force Majeure Clause

Force Majeure Clause provides relief to parties from performing their obligations under the agreement due to certain events which are beyond the control of the parties. The clause should specify what will constitute force majeure and what will be the options and remedies available to the parties at their disposal. The clause should as well specify as to the time limit for which the parties should wait and remedies if the parties find it impossible to perform at all. 

Payment Terms

The parties to an agreement come together for a purpose wherein one party provides services and the other party considers for the performance or providing of the services.

The service agreement should mention the consideration for completing or performing services and as well mention the expenses to be borne by the parties individually if any. In performing their obligation under the agreement including costs for parts, labour, and so forth).

The clause should contain the consideration to be made and the manner of payment of the same, It should as well provide the mechanism if the default is committed by any of the parties to the agreement.

Intellectual Property Rights

Intellectual property rights are the rights given for anything which has been created by the party.  The rights give the creator of the intellectual property an exclusive right. Therefore, it is important that the right of usage of the rights to use the intellectual property is clearly given to the other party for the usage and to what extent the same can be used by the other party. 

The clause should also make it clear that the rights belong to the creator and if any new item is being produced under the agreement as to who should have the rights of the same as to between the parties.

Representation and Warranties

Representations and Warranties in an agreement deal with the statements and facts which exist or which a party makes before the other party. The representation and warranties made by the parties of the agreement may be the basis of entering into an agreement and plays an important role.

Clearly defining the representation and warranties in an agreement will ensure that both the parties work towards the successful completion of an agreement and agree to certain facts and situations.

False representation and warranties will give the party suffering loss an option to claim damages from the defaulting party. 

Confidential Information

Service Agreement should include clauses defining what will constitute confidential information and the responsibility on the parties to protect the same. 

Care must be taken to define confidential information. Confidential Information may be information which was in existence but came to the knowledge of the other party due to the execution of the agreement. Secondly, the terms and financials of the agreement will also constitute confidential information between the parties.

The agreement should as well capture what information will not be covered under confidential information to avoid future liabilities.
The clause should as well define the time limit the clause will be applicable and the parties under an obligation to abide by the same. 

Indemnification

The clause provides protection against unforeseen damages or losses which may occur due to the act of the defaulting party or a third party who is not a party to the agreement. The clause shifts the liability to the person indemnifying as a result of its misuse or misappropriation of the services. 

Amendments

Change is the only constant, the parties to an agreement should always have the option built-in the agreement for an amendment if the need arises. It should provide the manner and as to when the amendment will be made by the parties.

Jurisdiction

In case of a dispute between the parties, if it is not clearly mentioned in the agreement itself as to where the dispute will lie between the parties, it may lead one of the parties to dispute the jurisdiction of the court where the suit is filed.

For avoiding any complexities wherein dispute arise and where to go for a resolution of the dispute, it is advisable to mention in the agreement only as to which court will have the jurisdiction.

The jurisdiction may be either exclusive or non-exclusive. Parties need to be cautious while deciding the manner of jurisdiction. Exclusive jurisdiction gives the rights exclusively to specific courts only.

On the other hand, non-exclusive jurisdiction provides the parties with an opportunity to avail the benefits of concurrent jurisdiction depending on their situation.  

Dispute Resolution Mechanism

Clauses with respect to dispute resolution are generally confined to the end of an agreement and many times not given the importance it deserves while drafting an agreement.

This clause has deep implications in deciding as to how the dispute is to be resolved and the obligations of the parties which are to be enforced.

Dispute resolution clause is different from the jurisdiction. Many times people confuse both as the same. Jurisdiction defines the boundary or limits whose law and courts will have the authority to decide the dispute.

On the other hand, dispute resolution provides a mechanism and manner of resolution of a dispute. It provides the option to avail of different options to resolve the dispute.

The clause should be clear and without any ambiguity. It gives effect to the wish of the parties as to the manner of resolution of a dispute. The dispute resolution clause provides the parties to avail various options and the stages of availing the same. Various modes of resolution are like mutual negotiation, arbitration, mediation, conciliation and mediation or finally through litigation in courts. 

Conclusion

Collaborative Service Agreements are important for the parties who come together for specific purposes by bringing their expertise, finance and resources, intellectual property rights together for achieving common purposes. Coming together for a common purpose has economic and financial benefits which the parties reap and maybe the first step in establishing a longer-term relationship. Therefore, for the same it is important the parties give sufficient time and energy to finalize the terms of the agreement which is beneficial to both the parties. 

References


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