Exclusive Business Cooperation Agreement
Exclusive Business Cooperation Agreement
An exclusive Business Cooperation Agreement is agreed upon by two companies for sharing services like Technology, Human Resources, Research, and Development for mutual benefit while keeping their competitor interference aside for the time the agreement is in place. The companies agree to work closely in cooperation with each other towards developing or selling a product and it is understood by both of them that whoever shares the services with their partner in mutual understanding will strictly not disclose the confidential information regarding the same, to other partners outside the Agreement.
In a Vendor partnership agreement, businesses choose to feature and mutually promote their product for a specified market industry, in exchange for exclusive distribution rights. All this requires a greater level of commitment, mutual trust, and confidence.
Working together while aiming at joint success, the businesses can achieve greater effectiveness with reduced costs since the resources are mutually shared.
What is an Exclusive Business Cooperation Agreement?
An Exclusive Business Cooperation Agreement allows companies to come towards working as one organization instead of acting as separate Business entities competing against each other in a market. It may also, be termed as "Partnership Agreement" or Memorandum of Understanding(MoU) since mutual understanding is reached upon between a Vendor and their Partners, where both of them are investing in the same product for a specific market without worrying about competition between the two.
The agreement contains a set of defined terms and conditions which governs the way of functioning of a partnership business. The terms and conditions draft includes some of the key details such as Service providing methodology, Confidentiality clause, Type of business, Registered name and address of the business, Length of partnership, etc.
When do you need an Exclusive Business Cooperation Agreement?
A business relationship between two companies cannot survive without a clear understanding of "how things will proceed?”. Without a properly defined code-of-conduct, Business Cooperation is no cooperation at all. As soon as both the participating parties decide to work together with full transparency and shared expectations, the need for having an Exclusive Business Cooperation Agreement becomes imperative.
Before entering into an agreement, it is extremely important to know beforehand, every possibility of chaos and disputes due to various unaddressed issues, so that in case of an emergency the stakeholders are ready with effective crisis response.
Thus the main purpose of a Business Cooperation The agreement is to cement the foundations of cooperation between the two organizations by building trust and confidence among the business partners who agree to mutually abide by the rules and guidelines laid down in the contract.
Inclusions in an Exclusive Business Cooperation Agreement
The Participating parties involved in an Exclusive Business Cooperation Agreement is a Vendor and their sales partner along with the Attorneys of both of them. The Exclusivity of the Agreement is strictly restricted between at least two companies with a definite confidentiality clause that prevents the sharing of services to partners outside the agreement. However, new partners can be admitted into partnership by editing the clause with mutual consent.
A partnership can be started off with a simple handshake while a formal agreement comes into immediate effect as soon as the draft is signed by both parties.
How to Draft an Exclusive Business Cooperation Agreement?
An agreement written poorly is worse than having no agreement at all. A partnership agreement is a basic foundation for any business relationship. It contains all the necessary legalities and is used as evidence in legal disputes. Therefore, the draft of such an agreement should always be:
·
Precise with a clear
understanding of things,
·
Communicative of each
other’s goals/expectations,
·
and most importantly the language of the draft must be complete
addressing all issues.
Procedure for drafting an Exclusive Business Cooperation Agreement:
1.
Firstly, Apply for the registration of your business partnership
firm at the Registrar of Firms. This can be done online.
2.
The duly signed copy of the partnership agreement containing all the
terms and conditions must be provided to the Registrar of Firms.
3.
Deposit all the necessary fees and stamp duties.
4. The
Registrar approves and issues a certificate of incorporation of your business
partnership firm.
Thus, your firm attains legal recognition.
Hiring an Attorney or a legal service who is an expert on the Exclusive Business Cooperation Agreement is always the best bet for drafting your agreement.
Benefits of Exclusive Business Cooperation Agreement
Some of the benefits of an Exclusive Business Cooperation Agreement is:
1.
Limiting the risk of disputes between the participating parties.
2.
More capital from the number of parties involved.
3.
Access to the shared resources of Technology, Human resources, etc.
4.
Defined expectations and goals.
5.
Low start-up costs.
6.
Less competition in a specific market.
7.
Transparency between cooperating businesses.
8.
Set guidelines for the smooth functioning of partnership.
9.
Effective crisis response.
The downside of the Exclusive Business Cooperation Agreement
Apart from great benefits, some disadvantages can be:
1.
Parties have unlimited liability.
2.
Parties are jointly responsible for other parties’ actions and
debts.
3.
Profits are to be shared.
4.
The risk of disagreement or withdrawal from business always looms
over.
5.
Disputes have a direct impact on the asset value of the business.
6.
You can’t have an edge over your competitor whom you are
cooperating with.
Types of Exclusive Business Cooperation Agreement
There are four different types of Partnership agreements viz:
1.
General partnership Agreement: In this, all the partners are
equally responsible for the actions of one partner. The liabilities of a business are
shared by all the general partners in business.
2.
Limited partnership Agreement: A limited partner is the one whose
liabilities are limited and does not participate in the day-to-management of
the business. This agreement is mainly for investors who only invest and
receive a profit share.
3.
Considering Liability partnership Agreement: Here, the liability
of a business partner is limited only to his investments in the business.
4. Limited
Liability partnership Agreement: In this, all the partners are personally liable
to their actions and debts. All the other partners are not responsible for
someone’s wrongdoings.
Key Clauses of the Exclusive Business Cooperation Agreement
Some of key clauses and terms of the Exclusive Business Cooperation Agreement are:
·
Agreement on Partner’s Contribution and authority in the Project.
·
Agreement on Partner’s Profit and losses share percentage.
·
Agreement on Partner’s Duties and Rights
·
Agreement on Partner’s Death or Disability
·
Agreement on Partner’s Intellectual property rights
·
Agreement on handling the sales
·
Agreement on the handling of disputes
·
Agreement on Dissolution of contract
What happens when you violate the Exclusive Business Cooperation Agreement
The breach of a Business partnership agreement will certainly lead to penalties. But apart from paying hefty fines, there are few consequences that may fall upon a business partner. Some of them can be:
·
You might not be able to use your business’ money.
·
Your staffing and decision making authority may be hampered.
·
You may not be able to invest capital without the consent of your
partner.
·
The business may meet its disastrous end.
Sample Exclusive Business Cooperation Agreement
You can download a sample Exclusive Business Cooperation Agreement here
Sources:
1.
https://legalvision.com.au/the-pros-and-cons-of-joint-venture-and-partnership-agreements/
4.
https://www.agreements.org/exclusive-business-cooperation-agreement.html/
Comments
Post a Comment