Collaboration Agreement

Are you a freelancer, general partnership or private limited company and looking for a collaboration agreement? This model is for businesses looking to enter into a collaboration agreement for a definite or indefinite period of time.

What is a collaboration agreement?

In a collaboration agreement, two (or more) business partners make agreements to achieve a goal together. This can be anything. Think, for example, of doing research, developing a new product or carrying out a project.

The nature and content differs for each collaboration. Below are three examples of possible forms of collaboration.

Example 1: All-in-one services

De Koffieman BV sells organic coffee beans to companies and Esko VOF sells espresso machines to the hospitality industry. Regularly, Esko is asked whether they can also supply coffee beans. This is why they approach De Koffieman for a collaboration.

After some market research, they decide to offer an all-in-one package together, so customers can buy an espresso machine incl. coffee subscription. Since agreements need to be made about costs and invoicing, among other things, they decide to lay this down in a collaboration agreement.

Example 2: Collaboration of freelancers

Anne works as an independent consultant. Among other things, she teaches courses on compliance. Because of a change in financial regulations, a large Dutch bank has asked her to provide 50 training courses. That task is too big for her alone.

She asks Rob, who is also a freelancer, to share the activities. The bank thinks this is a good idea, but requires them to draw up a collaboration agreement and put forward a quotation together. This will also include agreements on sickness replacement so that the training cycle is completed by a certain date.

Example 3: Research product improvement

Two electric bike manufacturers buy their parts from suppliers. They are both dissatisfied with one of those parts. It also appears that no suppliers can be found worldwide who can deliver the desired quality.

Both parties want to explore the possibility of producing this part themselves. The cost of doing so is high. Therefore, they enter into a collaboration agreement in which this research is carried out under strict confidentiality.

Why is a collaboration agreement important?

The law does not say much about collaborations. Therefore, in case of possible conflicts, there is nothing to fall back on. Conditions must therefore be laid down in advance. Once signed by both parties, the document is legally valid.

During the drafting process, you will be forced to think carefully about the details of the collaboration. Who will do what, how much time will it take and how will you deal with confidentiality and intellectual property? This creates clarity and prevents hassle, both during the journey and afterwards.

Is a collaboration agreement mandatory?

No. Often the collaboration has been going on for a while before it is decided to put agreements on paper. If you do not initially want to draw up a contract yet, it is wise to sign a nondisclosure agreement.

What should be in a collaboration agreement?

A good agreement should include at least the following things:

The bigger the stakes, the more issues are involved. Then it is wise to engage a lawyer to check or tailor the contract. The practical details are usually worked out in a separate quotation or project plan incl. budget.

Purpose

Common reasons for starting to work together are:

Often, one party has knowledge that the other does not have. Another example is that one party has a large network and the other party has a product that fits in well. In our model, you describe the goal you have in mind, but also how you support and strengthen each other in this.

Duration

You can choose a collaboration agreement for a definite or indefinite period. A term can be agreed or an event can be established that leads to (early) termination. In our example, it is also possible to automatically extend the contract by the same term after the expiry of a certain date.

When it comes to an indefinite collaboration, each party has the right to terminate it at any time. It is important to agree on a notice period. You can determine this by mutual agreement and include it in the contract.

Investment

Investment refers to all forms of investment. E.g. money, but also time and personnel. Depending on the type of collaboration, you can think of:

• Financial resources;
• Knowledge, expertise and experience;
• Customers, relationships and outlets;
• Software, data, machines, etc.

In the collaboration agreement, you lay down what will be invested once, but also how many working hours are expected from both parties on average per month. Our example contains the most common options. You can add or remove them yourself.

Costs, profits and losses

The simplest way is to divide all costs, profits and any losses in a certain ratio. You maintain accounting records and settle payments and receipts with each other once a month or quarter.

You can also choose to do this in proportion to investments made and labour hours worked. Another option is for one party to pay the other a so-called fixed fee per product sold, hour worked or new customer.

Finally, in the collaboration agreement, you fill in whether expenses above a certain amount must be discussed in advance and you agree on who sends invoices to the customer. Our example shows the most common allocation options.

Secrecy

You obviously don’t want confidential information to be out on the street. Our model includes a section on what is and is not covered by confidentiality. It also contains rules on giving permission to share information with third parties.

Upon written request and in any case upon termination of the agreement, all information received from the other party is returned or destroyed.

Competition

Our model includes a non-competion clause in which you prohibit or authorise each other to enter into similar collaborations with others during the agreement and/or after its expiry. You can also link an area (region or country) to this.

Competition agreements must be reasonable. For example, you may not impose an indefinite ban on collaboration. This also applies to the territory. A ban for the whole of the Netherlands, while you only operate in Utrecht, can be challenged legally.

Finally, a collaboration agreement should never violate competition law. If it should lead to the formation of a cartel, for instance, you could be fined. If you want to impose strict rules on each other, it is wise to have them checked by a lawyer.

Liability

What do you do and who bears the consequences if someone fails to honour their agreements or if damage occurs. This could be through inadvertence or by accident. It is important to agree that everyone is liable for their own actions. This is clearly stated in our model.

The exception, and this makes sense, is if the other person has acted intentionally or through their own fault. Furthermore, a situation may arise where no one could predict in advance that it would happen. Here, you indemnify each other for the consequences.

Intellectual property (IP)

Intellectual property rights mean all (un)registered copyright, licence, trademark, patent and similar rights. Sometimes you share information which is subject to IP rights. To prevent the other from misappropriating this information, you make agreements on the use of each other’s property.

Of course, it is also possible that a new idea, product or service emerges from the collaboration that can be officially registered. Our collaboration agreement assumes a 50-50 split when registering a new IP right. You can adjust this yourself.

Advantages and disadvantages

Advantages of collaboration have mainly to do with scalability. The so-called 1+1 =3 principle. Apart from the risks you run in doing so, there are always disadvantages. Keep these in mind when drawing up agreements, so that you can minimise them wherever possible.