Business Contracts

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An Overview

A non-disclosure agreement (NDA) is a legal contract that states certain information to be confidential and the extent to which its disclosure is restricted to third parties. It can be entered into with a person or an organization.

Confidential information includes trade secrets, business plans, business methods and strategies, drawings, charts, and so on. Software programs and code are also included in the category of confidential information. Consultants and agencies are usually asked to sign one to protect trade secrets as they mostly work with multiple organizations within the same industry.

Types of Non-Disclosure Agreements

  • One-way or unilateral agreement – Here, only one party has the confidential information to be shared with another party. The party in possession is called the ‘disclosing party’ and the other one is named the ‘receiving party’.
  • Two-way or bilateral agreement – Here, two parties are involved and both have the confidential information to be shared.
  • Multilateral agreement – Here, 3 or more parties are involved. One of them discloses sensitive or confidential information and the others promise to protect such information from further disclosures.

Benefits of a Non-Disclosure Agreement

Protects Business Secrets

An NDA is one of the most common ways to protect trade secrets and other confidential information. Consultants and agencies are usually asked to sign one to protect trade secrets.

Enhances Client Relationships

Businesses that work on third-party projects require their employees to sign NDAs, to restrict the use and disclosure of confidential information, and assure clients that their data is safe.

What Are the Key Elements of Non-disclosure Agreement

A valid non-disclosure agreement should include the following key provisions-

The Parties

This section will mention if the nondisclosure agreement is a unilateral, bilateral, or multilateral one. The details of the party/parties (names, addresses, etc) involved should be mentioned in this part.

Term of the Agreement

The nondisclosure agreement template must mention the date of execution of the agreement and the duration of the existence of the same. It should also mention if the rules and obligations related to disclosure of information will be applicable after the expiry of the nondisclosure agreement or not.

Confidential Information

The non-disclosure agreement format must specify what information is to be kept in the ‘confidential’ category or to be protected.

Disclosure of Confidentiality

This section of the non-disclosure agreement specifies the intentions for which the confidential data/information will be used. It will also specify with whom such information can be shared.

Dispute Resolution

The non-disclosure agreement must mention the remedial measures the parties will resort to, to resolve disputes, if any. It will include alternative forms of dispute resolution they may choose to employ, such as arbitration.

How to Write a Non-Disclosure Agreement?

  • Step 1: Once you send in a request, our representative will get in touch with you to understand your requirements
  • Step 2: If we require more details, we will contact you for the same
  • Step 3: Once these are received, we will work on the request and send the non-disclosure agreement format for your review within 3 to 4 working days

Note: In case you would like any changes to the non-disclosure agreement format, our law consultant will work on them. Two rounds of iterations are included in the original price.

Service-Level Agreement (SLA) – An Overview

A service-level agreement (SLA) is a signed document between a service provider and its customers that specifies the same services to be offered and the service standards that the provider must meet for a determined period of time.

Service providers are required to use SLAs to assist them in controlling expectations of customers and define the risk level and situations under which they are not responsible for outages or poor performance. Customers can benefit from SLAs as well, because the contract describes the service’s performance characteristics, which may be equated to the SLAs of other vendors, and creates ways for resolving service issues.

The SLA is one of two fundamental agreements that service providers typically have with their customers. Many service providers draft a professional service agreement to spell out the general policies and procedures under which they will work with customers.

A service-level commitment (SLC) is a broader version of SLA management. A Service level agreement differs from a contract in that it is bi – directional and includes two teams. An SLC, on the other hand, is a one-way responsibility that creates what a team can assure its clients at any given time.

Points To Keep In Mind While Drafting The SLA

  • Prepare the SLA at the beginning of the process to give yourself plenty of time to think about the drafting and the function it must fulfil
  • SLA needs to be imperfect and realistic. For it to be lasting, it must accomplish its goals and benefit both parties
  • SLA must be clear in its description of the service because it will need to be checked.
  • The compensation provision is essential
  • The review process shouldn’t take too long because doing so would negate its own goal and force the consumer to put up with poor quality for an extended period
  • In the event of a serious failure, the option to terminate must be included. severe failure

What Are the Three Types of SLA Agreement?

There are three types of SLA agreement. They are:

  • Customer SLA
  • Internal SLA
  • Multi Level SLA.
  • Customer Service Level Agreement: A customer service-level agreement is a contractual agreement between a service provider and its external customers. It is also known as an external service agreement. Here, the customer and service provider will reach an agreement on the services that will be provided.
  • Internal Service Level Agreement: An internal service level agreement (SLA) is a document that outlines the terms of a service agreement between different departments or teams within an organisation. It specifies the expectations and responsibilities of each party involved in the service, as well as the measures that will be taken to ensure that the service is delivered in a consistent and reliable manner.
  • Multilevel Service Level Agreement: A multilevel service level agreement (SLA) is a contract between a service provider and a customer that outlines the terms and conditions of the services provided. This type of SLA typically includes multiple levels of service, each with its own set of performance metrics and associated penalties or incentives.

Advantages of SLAs

The extent and magnitude to which a provider could provide services and utilities are specified in a service level agreement (SLA) or a service level agreement example. or in a service-level agreement example. or in a service-level agreement example. or in a service level agreement example..

  • This eliminates the possibility of unrealistic expectations
  • An SLA serves as a proof for the person receiving the services because it elaborates on the promised services in detail
  • The SLA serves as a channel for customers to air their grievances by outlining the process for providing feedback and complaints
  • An Service level agreement is an excellent tool for improving customer service
  • SLA help companies and clients communicate more effectively
  • This increases the transparency of transactions.

Operational Level Agreements (OLA)

OLAs are legal documents that describe how information and technology (IT) companies and providers intend to deliver a service to an internal customer and track performance indicators. The purpose of an OLA is to define the depth and scope of duties and responsibilities delegated to company departments.

Difference Between Operational Level Agreement (OLA) and Service-Level Agreement (SLA)

Before discussing and negotiating OLAs with internal teams, service providers commonly negotiate SLAs with clients. However, this approach cannot always be the most practical. An operational-level agreement helps teams identify cost dissimilarities, restrictions, and other trends, whereas SLAs make specific customer promises. Here are some of the additional differences between SLA and OLA:

  • Service based SLA exist between such a service provider and a third-party customer whereas the OLAs exist between internal support departments of a company that has agreed to a SLA
  • SLAs concentrate on the agreement’s service aspects, such as performance and accessibility. OLAs, in contrast, are committed to keep the service operational
  • SLA applies to the overall resolution of tickets, whereas OLAs apply to the support staff to which tickets are delegated.

Examples of Operational Level Agreements (OLA)

OLAs necessitate making critical promises to internal customers. Their ability to generate revenue is contingent on your ability to provide service and hardware. For example, every OLA must guarantee that the customer will only experience a certain amount of downtime.

Consider the following hypothetical agreement between being an IT vendor and an internet service provider (ISP):

  • An IT vendor supports Company A’s database, and Corporation A’s ISP provides Online SLAs to external clients
  • Company A signs a contract with the IT database vendor
  • They have to provide 23 hours of uptime, based on the IT vendor OLAs
  • For excessive downtime, Corporation A may seek financial compensation
  • Customers will stick with IT resellers who meet their expectations
  • As can be seen, the SLA is heavily reliant on the OLA’s promises and limitations
  • Because of their complexities, your OLAs should be carefully drafted, negotiated, and finalised, including some key terms that protect your company’s fiduciary interests.

Essential Components in a SLAs

The following are the key components of a SLA:

An overview of the agreement: This first section outlines the agreement’s fundamentals, including the involved parties, the launch date, and a general description of the services provided.

The services: The SLA should include detailed explanations of all services provided under all possible conditions, as well as turnaround time.

Provider interpretations: It should include how services are delivered, as to if maintenance services are offered, operating hours, dependencies, a process outline, and a list of all applications and technologies used.

Exclusions: Providing the requirements that are not supplied ought to be properly delineated in order to prevent misunderstandings and the possibility of third-party assumptions.

Service provision: Metrics for performance measurement and levels of performance are established. The client and consultancy services should agree on a list of all the performance measures that will be used to evaluate the service levels of the provider.

Redressing: Remuneration or payment should be defined if a supplier fails to meet their SLA.

Stakeholders: The agreement defines the involved parties and establishes their respective responsibilities.

Security: The service provider’s security measures are all defined in this section. This usually entails creating and approving anti-poaching, IT security, and nondisclosure agreement.

Risk management: Disaster recovery risk management procedures and a plan for disaster recovery will be developed and clearly communicated in this section.

Monitoring and reporting on services: The current functions, traceability intervals, and contract stakeholders are all defined in this section. On a regular basis, processes have been reviewed and changed. The service level agreement (SLA) and all formed key performance measures (KPIs) will be evaluated on a regular basis. This process is defined, as is the suitable process for making changes.

Termination procedure: The SLA will outline the circumstances under which the accord can be revoked or expires. Both parties should agree on a notice period.

Signatures: Finally, both parties’ stakeholders and authorised participants must sign the contract to prove their accord with every detail and process.

What Is a Franchise Agreement? – an Overview

Franchising is the practice where the business owner of an enterprise or company (franchisor) consents to another individual (franchisee) carrying out their own business under the title/brand name of the franchisor. In such a relationship, the franchisor offers their tools of business, technical know-how, intellectual property, and training to the franchisee. The franchisee applies the above and aims to profit both the franchisor and the franchisee. It is a profitable business model that allows domestic business persons to carry out successful foreign businesses within their country.

However, franchising is not an easy task as it requires a great deal of planning, negotiation, drafting, and agreements between the franchisor and the franchisee. The mutually understood terms that both parties reach leads to the formation of a franchise agreement. A franchise agreement is one legal document that is mutually agreed upon by the franchisor and the franchisee. It binds both of them into carrying out legal obligations for each other. An ideal franchise agreement includes various terms such as remuneration, timeline, conditions for usage of brand name, etc. Hence, it is important to be thorough with your franchise agreement so that the benefits out of such relationships are balanced.

We at Spinach Laws aim to provide cost-effective and thorough assistance that will make the setting up of your franchise business easy.

Benefits of a Franchise Agreement

  • As franchise agreements are valid legal documents, it binds the franchisor and the franchisee in a relationship where both have to adhere to specific provisions
  • As both the franchisor and the franchisee get monetary and other benefits out of the relationship, there is little chance of dispute or breach of agreements
  • The terms and provisions in the franchise agreement are mutually decided, this results in a healthy business relationship between both of them
  • A franchise agreement permits the franchisor to define guidelines for the maintenance of quality related to different facets of the trade before onboarding the franchisee and binding them in a franchise contract
  • With a franchise agreement format in place, the franchisor can set how the franchisee adopts the business and branding
  • The penalties for mismanagement or violation of the business branding are defined in the agreement to protect the brand name at all times.

What Should a Franchise Agreement Include?

An ideal franchise agreement should include the following clauses:

Details of the Franchisor and the Franchisee

The detailed relationship of both the members is included in this clause. It is the first detail included in the franchise agreement draft.

Timeline and Validity

This is the duration of the relationship between the franchisee and the franchisor. It is that period where the franchisee is allowed to see under the name and the mark of the franchisor. This duration can be extended if both have the agreement of the same.

Monetary Details to Be Included

  • Franchise Fee – This is the amount the franchisee has to pay to obtain the trademark and business name of the franchisor.
  • Royalty – This is a fixed percentage that the franchisee has to pay to the franchisor on a monthly basis.

The amount and mode of payment for either is as per the discussions between the franchisee and the franchisor.

Site Selection

It is the location or territory within which the franchisee is allowed to operate the business. The burden of finding the location is on the franchisee. This location is subject to the approval of the franchisor.

Business Operations

This includes details as to how the franchisor expects the franchisee to run their business. Some of the areas they cover here will include:

  • The operation of the franchisee unit, as per the operating standards set by the franchisor.
  • The goods and/or services the franchisee is allowed to offer.
  • The goods and/or services the franchisee needs to purchase exclusively from the franchisor.

Advertising

This section of the agreement gives the franchisee the responsibility to market, advertise and other promotional activities.

Intellectual Property

It includes the use of the trademarks and intellectual property that the franchisor owns that the franchisee is allowed to use for the business operations.

Training

The franchisor is responsible to provide required support and supervision to the franchisee. It is done to make sure that uniformity is maintained among all franchised businesses.

Termination Clauses

It includes the terms that mention detailed provisions related to the termination of the franchise agreement. It is related to those where either party fails to perform as per the terms mentioned in the agreement. It also mentions penalties in the event of a franchise agreement is terminated.

Master Service Agreement – An Overview

A master service agreement is a contract between two parties, a customer and a service provider, that specifies the terms and conditions that will apply to all long-term transactions between them. Contracts like these are important in industries where there are a lot of transactions between the service provider and the customer, and each one may have its own statement of work.

Benefits of a Master Service Agreement

Covers the Entire Relationship

The Master Service Agreement covers the entire relationship between service provider and customer, covering all aspects of the contract that are likely to arise. Such an agreement is beneficial to have in place before starting a long-term relationship.

Saves Time

It provides a framework to quickly negotiate agreements. Therefore, the same terms need not be repetitively negotiated for deals that are very similar to each other.

Checklist of Master Service Agreement

  • The terms of the contract must be futuristic with the view of issues encountered by parties
  • The functions and duties of the first party company
  • The functions and duties of the second party company.

Common Terms of a MSA Contract

  • MSA’s standard terms that apply to all projects that require the same professional service, as well as clauses that do not apply to subsequent or future transactions. There would be a separate clause for the application of the agreement’s common or generic terminology
  • Dispute or arbitration clause; the seat of arbitration, venue of arbitration, and laws governing the arbitration
  • Intellectual property rights; this part of the contract deals with the intellectual properties created or arose out of the business transaction
  • Confidentiality term; this a widely used term of the contract especially by the data processing companies
  • Indemnity; the major clause of any contract which is most commonly used to sue the other party and third party sue the parties to contract for compensation
  • The way by which a particular condition or term will be performed
  • The benchmark for the service rendered or products delivered
  • The consequences of the breach of contract or non-compliance of terms
  • Handling of the employee and soliciting their clients
  • Warranty and guarantee
  • Mode of payment of fees and other professional charges.

Master Service Agreement Procedure

  • Step 1: Once you send in a request, one of our experts will get in touch with you to understand your requirements
  • Step 2: If further details are required, we will contact you for the same
  • Step 3: Once these are in, we will work on the request and send it to you for review within 3 to 4 working days.

Note: In case you would like to make any changes to the agreement, our lawyers will work on them. Two rounds of iterations are included in the original price.

Documents Required to Register a Master Service Agreement

  • Government ID proof with photo
  • Incorporation certificate
  • Address proof
  • The financial statement of both companies for the past financial year.

Shareholder’s Agreement – an Overview

A shareholder’s agreement is just a contract determining the liaison between the shareowners of a business or a company. A shareholder’s agreement in India comprises the rights and duties, reallocation of shares, operations of the business, and how crucial verdicts and decisions are made.

A shareholder agreement’s purpose is to protect and treat shareholders equally, as well as to allow them to make decisions about third parties who may become shareholders in the future. A shareholder agreement is more important to minority shareholders than it is to majority shareholders because it emphasizes the majority shareholders’ commitment to protect minority shareholders from abuse and provide them a voice when important decisions are made.

Benefits of a Shareholder’s Agreement

It clears authority

A shareholder’s agreement India clears the authority and standing of a shareowner and the license you stock as the issuer of such shares by characterizing the power and risks for all. Additionally, it mediates as a governor of the interaction between small and big shareholders.

Ease in making amendments

A shareholder’s agreement facilitates the perfect conditions for making amendments to the company constitution. It is suitable for small-scale and medium businesses that do not wish to officially change the entire constitution whenever minute changes are required to be made.

Checklist of a Shareholder’s Agreement Include

Before finalizing the shareholder agreement, it is important to review the shareholder agreement checklist to ensure all necessary provisions are included.

Rights of a shareholder

  • Right to vote
  • Right to appoint directors and the company auditor
  • Right to ask for a general meeting
  • Right to inspect the books & registers of the company
  • Right to the financial statements of the company

Regulations related to the transfer and sale of shares of the company

Certain rules need to be incorporated in a shareholders agreement India to protect the shareholders’ interest with regards to the transfer and sale of company shareholders agreement. Such rules would ensure that such a sale or transfer happens only after receiving the mutual consent of the parties associated.

Financial requirements of the company

Shareholders can proceed to obtain the most feasible source of funding, whenever they think it to be beneficial for the company. The shareholder’s agreement draft includes the procedure to obtain such finances.

Requirements of quorum

The shareholder’s agreement will mention the requirements related to a quorum (the minimum number of members required to constitute a valid meeting)

Methods for Valuation of shares of the company

Considering the frequent fluctuations in the market, proper valuation of company shares is extremely important for the fortunes of the company. The valuation methods and approaches are laid down precisely in the shareholder’s agreement India.

Guidelines to run the company

The shareholders agreement India would contain the guidelines, policies, and procedures to ensure the smooth running of the company on a day-to-day basis.

Shareholder Liabilities

Shareholders only have limited liability with the company and are not liable directly for the activities of the company. The liabilities of the shareholders are defined clearly in the agreement.

Protection of minority shareholders

The rights of the minority company shareholders agreement, as per provisions of the Companies Act, 2013, are laid down in the shareholder’s agreement. The agreement will ensure the protection of the minority shareholders in the event of mismanagement, oppression, or Piggy Backing (sale of shares by majority shareholders).

Advantages of a Shareholder’s Agreement

Protects Smaller Shareholders:

A company may have majority and minority shareholders. A shareholder’s agreement states the role and protects the rights of shareholders in india.

Purchase of Shares

A minority shareholder will have access to purchasing shares from other shareholders, just like a majority shareholder.

Gaining Control:

A shareholder’s agreement will ensure that shareholders will have legal association with the company, including setting or modifying rules and guidelines the rights of shareholders in india.

Protects Position:

Shareholder’s agreement ensures the position or roles of shareholders, within a company, is protected.

Shareholder Restrictions:

Restrictions on matters that can be decided by shareholders can be included in the agreement.

Ensures Privacy:

While the articles of association are made public, the terms of a shareholder’s agreement is private.

Process of Drafting a Shareholders Agreement

  • Step 1: Upon contact, your request to file for a shareholders’ agreement will be received and our representative will be in touch with you to take your request forward
  • Step 2: If we need more information from your end, we will call you as and when required
  • Step 3: After we receive all your details, our in-house lawyers and legal experts will create the drafting a shareholders agreement and send it across for your view within 5- 6 business days.

Note: Your original price includes two rounds of iterations. Therefore, if you need any changes done to the shareholder’s agreement format, our lawyers will do the needful and send it across to you for your approval once again.

Joint Venture Agreement – Overview

Joint Venture Agreement involves existing businesses working together financially to complete a project. The majority of businesses that lack the necessary resources, expertise, and tools perform it. They rely on other established businesses to work together. It has no bearing on the companies that are cooperating legally. A JV agreement binds businesses legally, clarifies the parameters of shared efforts, highlights differences, and makes it easier to include clauses for profit-sharing and business operations. In India, they are frequently observed between international and local businesses.

It is recommended to conduct due diligence research before making an investment in a joint venture with another business. The Joint Venture agreement must include all of the essential clauses and provisions that protect each company’s interests. Creating a JV agreement is just a few steps away, thanks to Spinach Laws !

Benefits for a Company in a Joint Venture Agreement

  • Cost minimisation: Cost minimisation of more resources, including office space and access to suppliers and distribution networks, may be the result of a successful collaboration. It is more economical, time- and energy-efficient to obtain these resources alone.
  • Cultural Alignments: It aids businesses in adjusting to emerging markets. Foreign businesses can comprehend market trends and adjust their development accordingly
  • Overcoming Legal Obstacles: Joint Venture agreements are more desirable because certain businesses and sectors may not be open to foreign investment due to legal restrictions
  • Minimal Liability: Joint venture arrangements enable businesses to preserve their own legal identities. For companies that use 100% FDI, it is a minimum liability alternative
  • Sharing Risks And Benefits: In JV agreements, risks and benefits may be shared and distributed. This encourages working organisations to complete the assignment successfully and without running the danger of failing
  • Asset Sharing: Joint venture agreements give cooperating businesses access to and usage of assets like human resources, intellectual property, and technology.

What Should a Joint Venture Agreement Must Cover?

Applicable law, shareholding patterns, the composition of the board of directors, the management committee, the frequency and location of board meetings, the location of general meetings, and the makeup of the quorum required to make critical decisions at

  • Board meetings
  • Share transfers
  • Dividend principles
  • The use of money, whether in kind or cash
  • Change of control, restrictions or prohibitions on the assignment, restrictions on the use of trade secrets, indemnification, and confidentiality
  • Jurisdiction for dispute resolution; and Resignation requirements and notice.

Required Documents for a Joint Venture Agreement

The joint venture’s name must appear on all documents pertaining to the venture agreement.

  • Documents created by any of the members that are connected to the project or venture and reflect the performance of tasks carried out in accordance with the contract
  • Any copyrights (if any) to reproduce comparable works are granted to a member of the agreement by another member
  • Documents that hold the venture’s members harmless from lawsuits, liabilities, losses, fees, and expenses incurred as a result of using the designs and drawings for one or more projects.

How Joint Venture Contracts Operate?

Joint venture contracts are flexible and can be written to combine businesses of any size on certain projects. This makes it possible to achieve desired results in a more effective and efficient way. Each party is made aware of their responsibilities, rights, and limitations by the contract.

The Steps For Joint-Venture Agreements Are Described Below:

  • Step 1:Consult with possible partners about opportunities
  • Step 2:Engage company attorneys to provide legal counsel
  • Step 3:Determine the right kind of joint venture
  • Step 4:Involve drafting the initial version of your joint venture agreement and paying your taxes on time and accurately
  • Step 5:Continue to seek guidance to ensure legal compliance
  • Step 6:Add any necessary JV agreement revisions.

Even though JV agreements and partnership agreements are similar, there are still a number of variances. For a specific amount of time, a joint venture agreement is utilised in the commission for a single activity. Partnership contracts signify an enduring, protracted partnership.

Important Components Of A Joint Venture Agreement

A joint venture agreement’s most important component is determining whether the partner you choose is the best fit for your business. Consider whether the partnership actually improves your competitive position. Create a joint venture agreement with specific provisions after selecting the ideal partnership to advance the collaboration. The Following Is a Iist of the 10 Essential Components of a Joint Venture Agreement

  • Company address
  • Types of joint ventures
  • Agreement’s objectives
  • Agreement’s objectives
  • Members’ names and addresses responsibilities
  • prerequisites for voting and formal meetings
  • A percentage of ownership is transferred
  • Allocation of profits or losses
  • Terms for dissolution
  • Confidential and non-compete agreements

The list mentioned above is a fantastic place to start, but you might also need to include other clauses in your agreement. Business attorneys can find out more about your working connection and create a joint venture agreement that meets the requirements of both parties. With this approach, you can be confident that you won’t make any legal errors that will come back to bite you.

What Types of Joint Ventures Exist?

Contractual:

When two or more parties decide to work together on a business project and sign an agreement outlining the conditions of their collaboration, they have entered into a contractual joint venture. With a common objective but no sharing of earnings or losses, the members continue to run their own independent businesses. There is no need to register, and each party maintains independent accounting records.

Generalised Partnership:

Generalised Partnership: A general firm is a type of joint venture where the members are jointly and liable for the partnership’s obligations and agree to divide the project’s profits and losses. This type of joint venture is primarily used for real estate initiatives rather than corporate ventures involving research and/or product creation.

Why Do Companies Create Joint Ventures?

When two or more companies want to work together towards a common goal where they will each share in the risk and gain, they form a joint venture. It enables each company to develop without needing outside financing. Other motivations for corporations to form joint venture relationships include access to larger markets, resource sharing, funding the expansion of another company, product development, and diversification.

What Are A Joint Venture’s Benefits And Drawbacks?

Following are some advantages of working with another company:

  • More resources, either financial or technological
  • Greater ability and knowledge
  • Access to fresh markets and avenues for distribution
  • Partner with greater capacity for both new and existing goods and services
  • Diversification
  • Control and flexibility over the conditions of the connection

There are benefits to partnering with another company, but there are also some potential disadvantages, such as:

  • Imbalance in terms of knowledge, resources, or investment
  • Various management or leadership philosophies, or various office cultures
  • Disputes may arise if the venture’s scope is incorrectly framed (as the partners in a joint venture are often competitors)

Founders Agreement – Overview

A founders agreement is an official contract or a legal agreement executed between the co-founders of the company while setting up a business. This agreement elucidates the roles, rights and duties, responsibilities, ownership, liabilities, and investment proportion of each founder.

  • A founders agreement should be made in the written format, not oral
  • Two or more partners jointly can enter into the founders agreement called co-partners/ parties
  • All co-founders will enter into the agreement exactly while incorporating the business or company.

The objective of the founders agreement is to avoid disputes regarding business, which may arise over time between co-founders. This agreement apparently set out the strategy of the founders, who should act within the ambit and should follow the mandatory provisions laid on.

Founders agreements also help in tackling uncertain occurrences like the death of the co-founder, resignation, which directly affects the sustained growth and smooth running of the business or firm.

Benefits of a Founders Agreement

Determining the Type of Business Entity:

The founders agreement will clearly mention the nature and type of entity that should be established by the co-founders, thereby setting the proper path to be followed.

Outlined Business Plans:

This agreement describes the vision and mission of the entity and sets the short term and long term goals to be achieved over a period of time.

Designating the Roles and Responsibilities:

Obviously, there will be overlapping roles and functions between co-founders without having a proper framework of the assigned roles. Therefore, it is important to designate the roles and responsibilities of the co-founders, in accordance with their area of mastery like marketing, operations, finance, etc.

Structure of Ownership:

The founders agreement will clearly specify the structure of ownership pertaining to the initial contribution made by the cofounder or the percentage of the equity shares held by the cofounder in case of a company, thereby avoiding any future conflicts in between them.

Decision Making:

At a certain point in time, there will be an ideological conflict between co-founders, So these conflicts are to be handled through the proper decision-making process. Here the founders agreement will formulate a procedure to be followed during the decision making process. If the voting system is adopted, then it should define the value of votes for each founder and provide a solution in case of a deadlock situation.

Compensation Provisions:

This agreement laid down the scheme of compensation to be carried out, if anyone of the cofounder has violated the provisions mandated. Here, the proportion of the compensation to be made will be mentioned for every cofounder.

Expulsion of Co-founders:

Any co-founder can be evicted from the company for indulging in fraudulent activities like misappropriation of funds, sexual harassment, and getting employed with other organisations. This agreement ensures a proper structure on how to deal with these situations and sorting out appropriate funds to be reverted to the expelled co-founder.

Confidentiality:

There was a separate clause on confidentiality in the founders agreement, which makes an obligation for founders to not reveal the secrets of the business.

Documents Required for Preparation of a Founders Agreement

  • Address proof of all co-founders
  • Identity proof of all co-founders
  • Identity proof of witnesses
  • A clear objective of the company
  • The number of equity shares of each co-founder
  • The overall percentage of shares of each co-founder.

Procedure for Drafting a Founders Agreement

The procedure for drafting the founders agreement involves the following steps:

  • Step 1: The draft of the founders agreement is prepared by including all the required fields, like objectives of the company, terms, and conditions to be followed by the co-founders
  • Step 2: Once the drafting process is complete, check if all mandatory provisions have been included, with no ambiguous clauses
  • Step 3: Add additional information that has to be furnished in the agreement, if required
  • Step 4: The final draft should be acknowledged by all the cofounders, that it has been scrutinized with acceptance of the aforementioned agreement
  • Step 5: Once all co-founders have agreed to the agreement, it should be notarized on a non-judicial stamp paper
  • Step 6: After notarizing, get the signature of all the co-founders on the agreement
  • Step 7: Before entering into the agreement, get expert guidance to avoid disputes.

Vendor Agreement – an Overview

A vendor agreement is an arbitration in which a company owner, or a person, hires someone to provide goods or services. The offerings can be software, office supplies, professional services, consultants, technology services, event planning, marketing, and much more.

It is a legal document stipulating the provisions regarding the work performed by the vendor. It is a contract that specifies the conditions regarding the performance of a certain work. This is used for purposes like office supplies, consultants, and services.

Today, vendor contracts are practiced in every sort of industry, including licensed services, technology, marketing, event planning, and much more. A quality vendor service agreement simply declares the product or service the vendor will provide and the expectations of the deal from the beginning. It also diminishes the chance of disagreement or confusion for everyone involved.

A vendor service agreement is accepted for all types of events, including farmers’ markets, carnivals, or fairs, to assure everyone benefits from the experience.

What are the Benefits of a Vendor Contract?

Minimizes Liabilities

A well-defined Vendor contract will minimize the risk of future lawsuits, as the rights and responsibilities of involved parties are clearly defined in the Vendor contract.

Defines The Process

A vendor contract can be tailored to detail the exact job description of the vendor. Moreover, the vendor will have to put forth his/her allotment, comfort, and amenities required as well as state his/her mode of transaction for remuneration.


When to Use Vendor Service Agreement?

A vendor service agreement places the expectation, event administrators have for vendors, and concedes event planners to combine clauses with particular features, such as if they expect a part of the vendor’s interests to go towards the venue rental. It benefits to assure that vendors will report at the right time, and follow the laws of the event.

Checklist for Preparing a Vendor Agreement

While making a vendor contract both parties should keep the following things in mind:

  • Date of agreement and the date of providing services or delivery of goods should be provided in the agreement
  • Correct time of the delivery should be provided in the agreement
  • Location where the service has been provided
  • Description of work without which a vendor agreement is considered inoperative
  • Clarification of a vending license to check whether the organization is permitted to deal with the product
  • Draft a brief statement of vendor expectations
  • The imposition of tax on products and services
  • Delivery details.

Procedure for Preparing a Vendor Contract

A two-step procedure must be followed to prepare a vendor agreement:

  • To prepare a vendor agreement, both parties should draft the agreement and add all the required clauses
  • Once the vendor agreement draft is ready, verify and finalise with the signature of both parties on the agreement.

Common Factors in Vendor Agreement Clauses

A Clear Picture

There should be a proper description of the product or service.

Payment Terms

There must be a proper payment or costing method like how much payment is due, mode of payment, late payment, terms of payment, and penalties for late payment.

Period of Functionality

There must be a clear focus on how long the agreement is binding on parties. The duration must be fixed before beginning the service, and until its conclusion.

Warranties and Representations

These are the important keynotes for a vendor agreement. The vendor should be comfortable with warranties and representations before entering into a Vendor contract. To prepare a vendor agreement, both parties should draft the agreement and include all the required clauses.

Confidentiality

If you are implementing a piece of intimate information to the vendor then a clause of confidentiality represents a very crucial role. Since it protects data from leakage.

Exclusivity

All vendors should have an exclusive relationship with the business owner, as the product is unique to the business.

Intellectual Property

When vendors provide service or product to owners, while dealing with the business, it should be only provided to the owners. There should not be another owner, to avoid the risk of one getting the grant of intellectual; property license.

Limited Liability

In the case of vendors, the liability is limited to the cost of services as this is not such a good provision in case of agreement. Moreover, from the perspective of business, if something goes wrong then one should charge for the damages, more than the cost of services.

Indemnity

Indemnification means when one party shows interest to bear the losses of other parties, under ambiguous circumstances.

Insurance

To ensure safety, it is a very common practice in India to get insurance.

Relation With Parties

An agreement should specify the related parties. The vendors must be treated as independent contractors. No other person can act on his behalf other than himself.

Key Clauses to be Included in a Vendor Agreement

  • Specify the goods and services that will be provided
  • Modes of payment
  • How a client will be billed
  • How a client will contact for accounts payable details
  • Statement of work
  • Legal requirements
  • Insurance
  • The vendor is not an employee and is not eligible for any employment benefits
  • The vendor is an independent contractor
  • Conditions of termination
  • Conditions of payment or reimbursement of attorney fees.

Consultancy Agreement – An Overview

A consultancy agreement is a legal document that is used anytime a company hires an outside consultancy firm or consultant. The company may decide to hire these consultants on a temporary basis as part of a certain programme or project. Rather than hiring such people for extended periods of time, the company seeks external experts with in-depth understanding in that field. When the nature of the employment is contractual, it is always preferable to sign a consultancy service agreement. It serves as legal proof that the company and the consultancy agreement reached based on some basic criteria. Doing so will prevent any mishaps from taking place.

When Is a Consultancy Agreement Required?

A consultancy agreement for services becomes necessary whenever a company or firm employs consultants or any project.

  • Firms or companies might take up work in a domain or field that is not very familiar to them
  • In such cases, rather than employing many people who are experts in that field, companies prefer to take the help of a consultancy agency
  • Such consultants have unique and focused knowledge in an area and can help the firm for short-term projects
  • Not only does this help the company cut long-term costs, but it also enables them to work on more varied projects
  • In such cases, to ensure that the best interests of both parties are met, they may enter into a consultancy agreement
  • Such a consultancy service agreement for services provides that there is no miscommunication or cheating from either side, as it binds both parties via a legal document.

Who Is Involved in a Consultancy Agreement?

The consultancy agreement is primarily made between the company and the consultant or consultancy firm in question.

  • The consultancy service agreement concerns itself with the work being done, length of employment, payment and salary concerns, and also other terms and conditions
  • Since the consultant agreement for services contains information regarding the task at hand, it involves both the employer and the consultant
  • In many ways, a consultancy service agreement is a type of service agreement.

Elements of a Consultancy Agreement

Here’s a look at the significant elements of a consultancy agreement:

  • Scope of work: The consultancy agreement for services must specify all the duties, obligations, responsibilities, and functions that the consultant needs to perform. While the method of his working might not be defined, everything expected of the consultant must be mentioned. Therefore, the employer, in most cases, gives the consultant the freedom to work as per their comfort.
  • Term: The term sub-clause mentions a period within which the company will require services from the consultant. The term also helps the consultant know just how long they are expected to contribute to a project. Sometimes, it is quantified in years or in project completion time.
  • Payment terms: The payment terms usually include all the details regarding compensation that the consultant will receive from the company. It will also specify how the company will pay the consultant, which payment method they will use, and whether the consultant will receive extra allowances.
  • Confidentiality: In some instances, the work that the company has for the consultation will be secretive. Therefore, they will add a confidentiality clause in the consultancy agreement to make sure that all the data they share remains private. Such a provision ensures that the consultant will not make confidential data public, thereby causing harm to the company.
  • Termination: The termination clause explains all the situations under which the company can terminate the consultant’s employment. It will also mention how much notice will be given and even under what circumstances the consultant can leave the job mid-way.
  • Noncompetition: Such a section details how long the consultant must wait before engaging in such services with other competitors of the company. It specifies that during a stipulated term, the consultant will not engage with competing companies in any way.
  • Non Solicitation: The non-solicitation clause ensures that the consultant does not attempt to solicit any customers from the parent company after the end of the project. Furthermore, when extended to employees, the clause ensures that the consultant will not in any way, recruit or induce, any of the company’s employees.
  • Indemnification: Such a clause protects the consultant from lawsuits of any kind due to the client’s business.

Benefits of a Consultancy Agreement

  • Details the activities that the consultant agreement is contractually and legally responsible for
  • Serves in protecting the interests of both the company and the consultant in question
  • Covers all the details regarding the employment and project undertaken
  • Acts as a legal document in case of any disputes between the company and the consultant
  • Reduces the risk of litigation.

What to Consider Before Signing a Consultancy Service Agreement

  • Make sure you go through the consultancy service agreement for services and rectify any mistakes and clarify all your doubts. Have your lawyer go through the contract and explain every clause to you so that you understand it completely. You must make sure that the consultancy service agreement is well interpreted so that both you and the company share the same expectations concerning your work
  • Do not just assume that the company will be upset or annoyed if you raise concerns over individual sections or clauses in the business consultancy agreement. Such fear should not stop you from speaking out your mind regarding things you are not comfortable within the contract. All companies know how negotiations work and will not have issues going over the clauses with you if you ask for help
  • Use the business consultancy agreement to define your relationship with the firm, and so make sure you get things right. Not only will this prevent any disputes in the future, but it will also make the process a lot smoother and fruitful for both
  • In case you work for a consultancy firm, make sure the business consultancy agreement does not violate any of your employer’s policies. Since most institutions have policies regarding conflict of interest or commitment, make sure your contract does not put any of those policies under fire
  • Also, go through the confidentiality clause and make sure you understand what is expected of you. Similarly, make sure the financial consultancy agreement protects your rights and Internet Privacy and data concerns
  • Get help from a lawyer in case you don’t understand all the terms in the contract. Click here to get lawyer services. It is always better to clear things as they arise, rather than mess up in the end. Furthermore, there might be issues that you don’t even understand in the financial consultancy agreement that an experienced lawyer can raise. This, in turn, will help you protect your best interests efficiently.

Memorandum of Understanding (MOU) – An Overview

A Memorandum of Understanding (MOU) is a written agreement to continue or proceed. It indicates that the parties have come to an agreement and are moving on in their business relationship. It is an earnest declaration that a contract is imminent, even if it is not legally binding.

  • An MOU online precisely outlines particular points of an agreement
  • It identifies the parties, explains the project on which they are agreeing, determines its scope, and details each party’s role and responsibilities
  • While not legally enforceable, the MOU of company is an important step because of the time and effort involved in negotiating and drafting an adequate document
  • To create an MoU for Service Agreement , participating parties are required to reach a mutual understanding. In the process, each side receives what is more important to the other before proceeding forward
  • In general, each party involved draft its own MoU for business, with favourable or best-case scenarios
  • It considers the selected or ideal outcome for the said party
  • It also includes what the party has to offer to the other party/ parties and the non-negotiable points from its purview
  • These will be the starting points with which the party goes ahead with the negotiations.

Steps Involved in MOU Drafting

The following are the steps involved in drafting a memorandum of understanding:

  • Each party involved decides what they want and are willing to compromise on.
  • Parties then begin the initial MOU’s drafting process.
  • The MOU of company usually specifies rules that apply to the mediation procedure.
  • Following the conclusion of negotiations, the parties agree on the MOU’s start and end dates as well as any termination policies.
  • At the very end, the MOU for business is signed after each party has included any restrictions, disclaimersprivacy policy statements, etc.

Memorandum of Understanding (MOU) Format

Find the attached partial MOU Format below:

This MEMORANDUM OF UNDERSTANDING (the “MOU”) on _____________, 2022 (hereinafter referred to as the “Effective Date”) at _________, India.

BY AND BETWEEN

___________, Represented by Represented by Mr. _______________, having its offices at ________________________________ (hereinafter referred to as “_______”) where such expression shall, unless repugnant to the context thereof, be deemed to include its respective legal heirs, representatives, administrators, permitted successors and assigns;

AND

Mr. _______________________, S/o ___________________, bearing Aadhar number ______________, residing at, ________________________________ (hereinafter referred to as “Second party/ Mr. ___________________.”) where such expression shall, unless repugnant to the context thereof, be deemed to include its respective legal heirs, representatives, administrators, permitted successors and assigns;

The Party of First Part and Second Part shall be individually referred to as “Party”. Both the Parties collectively referred to as “Parties”.

WHEREAS _________ is engaged in the business of _______________________, India. (Hereinafter referred as ______________)

WHEREAS Mr. _______________, the second party herein, is desirous of investing ________ in the said project more fully described in this Memorandum of Understanding (hereinafter referred as the “MoU”)

Fill out the lead form to get a complete memorandum of understanding format.

Benefits of Online MOU Drafting

Establishes a Common Intention

  • With any business dealing, it is paramount that both parties understand each other’s goals and objectives
  • An MOU of company can be a great asset to your business relations
  • It is highly beneficial with clear terms and effective communication and dealings.

Reduces Risk of Uncertainty

  • With any business dealing, it is paramount that both parties understand each other’s goals and objectives
  • An MOU for business can be a great asset to your business relations
  • It is highly beneficial with clear terms and effective communication and dealings.

Records Prior Agreements

  • Often during negotiations, two or more parties agree on certain terms which would then appear in the future contract. If a party retracts or forgets these terms, online MOU comes handy
  • Although the document is not legally binding, it is useful as it records what has been agreed upon during negotiations
  • Therefore, this provides a clear understanding of the parties as to their common objectives.

The Ease of Ending Engagements

  • An MOU can facilitate positive relations between parties as terms are set out. An online MOU for business of company is a great starting point that establishes what both parties want to achieve out of the agreement
  • Therefore, if you want to exit the agreement after the contract is formed, a formal termination process must be ensured. This can be more complicated, stressful, and sometimes expensive

Provides a Framework for Future Dealings

  • An MOU online can put our minds at ease. Having the proposed terms already set out in a prior document provides a framework for future dealings
  • The MOU of business can also be referred back to as a reminder of the parties’ objectives and intentions if any confusion arises.

Secures The Partnership

  • The master service agreement envelopes an entire business relationship between two parties, covering all facets of the agreement that is likely to emerge
  • Such a contract is an advantage for anyone beginning a long-standing association with a dealer or a client.

Time-Saving

  • A master service agreement promotes a structure to consider and work out terms and requirements
  • So, the same conditions need not be continuously bargained for deals that are identical or associated with one another.

Checklist for MOU Drafting

At a minimum, an online MOU must be executed between a recipient and subrecipient and a third-party service provider which includes the following information.

  • Agency Information
  • Recipient’s or sub-recipients identification information with points of contact
  • Service provider’s identifying information with points of contact
  • The unconditional commitment of third party providers to provide service
  • Description of services to be provided
  • Provision of the scope of services
  • Specific contract to be matched
  • Duration of the contract
  • Point-in-time number of clients receiving service
  • Total clients receiving service over the grant term
  • Qualification of persons providing service
  • The estimated value of services provided
  • Documentation of service match
  • Documentation requirements, and responsibilities of the service provider and recipient
  • Standard timelines of the service provider and recipient for providing services to individuals.

When Is an MOU Used?

Memorandum of understanding are used by people and organisations in a variety of circumstances, such as:

  • Creating a payment plan, especially if one is not mentioned in the contract.
  • Organisations may use an MOU of company to explain their goals and intentions in relation to a contract.
  • In Outlining transactional terms which means businesses may utilise MOUs as an amendment to a legal contract, such as a prenuptial agreement or a sale of real estate.
  • An information memorandum is another type of MOU that can be utilised for both professional and private purposes. The parties’ knowledge of the problem or project they are working on is explained in this paper. An offering memorandum is another name for it.

Features of MOU Agreement

  • The parties between whom the memorandum of understanding is being signed should be identified by name and other relevant information.
  • It should be crystal obvious what the signed memorandum’s objectives and purpose are.
  • It should outline the schedule for the parties’ meetings. For instance, the parties may agree to meet at least once every three months.
  • The amount of capital contribution that each party will provide should be specified in the memorandum.
  • The individual with the authority to make important financial decisions should also be mentioned.
  • The assignment or programme being done should also maintain its financial record keeping.
  • Management, The memorandum might stipulate who will be in charge of running the programme on a daily basis. It’s important to state the position’s duties, responsibilities, and compensation.
  • The MoU for Service Agreement must be signed and dated by the authorised representatives of each party or organisation after it has been produced and approved by all parties.
  • The commencement and ending dates of the memorandum, as well as the term of the agreement between the parties, should be specified. It should also specify the conditions under which such a memo will be terminated.

Other Names for a Memorandum of Understanding

There are a few names for a memorandum of understanding which is given below:

  • MOU
  • MoU
  • Memorandum of Understanding Form
  • MOU Agreement

Legal Considerations of an MoU for Service Agreement

MOUs must have the following in order to be regarded as legally binding:

  • The names, addresses, and businesses of all parties are provided (if applicable).
  • In addition, the MoU for Service Agreement must make it clear that it is not a contract.
  • The MoU for Service Agreement must expressly state the agreement’s goals. Separate parts should also be included for each party’s intentions and objectives.
  • Think on how this part should describe financial responsibilities, such as who will oversee finances and how they must be managed.
  • The MoU for Service Agreement must be signed by all parties involved.
  • With each of these clauses in place, the MOU may be recognised as a contract and be enforced if the language specifically explains the parameters of the agreement and is supported by consideration.

Stamp Duty on MOU of Company

MOUs typically do not require payment of stamp duty. However, the online MOU should be stamped if it contains a commitment to buy real estate valued more than ₹100 and you need to present it in court.

A document with paid stamp duty has admissible value and is allowed in court. If a document is not properly stamped, the court will not accept it as evidence.

Types of Memorandum of Understanding

Memorandums of Understanding come in two types:

  • Bilateral
  • Multilateral

A multilateral memorandum of understanding is a pact reached by more than two parties, as opposed to a bilateral memorandum of understanding, which is a pact between two parties.

Memorandum of Understanding (MOU) – Process in India

A MOU (Memorandum of Understanding) is nothing but an agreement executed between 2 or more willing parties, in the format of a formal document. An online MoU is not legally binding on the parties. However, it indicates the willingness or intention of the parties involved, to proceed with the contract.

An MoU for business often defines the purpose and scope of a negotiation and hence, it can be regarded as the beginning point of the said negotiation or talk. More often than not, MOUs are seen in negotiations related to global treaties. They are also seen in business dealings involving high stakes (for example, merger talks).

Concerning MOUs in India, several laws govern its functioning. Section 10 of the Indian Contract Act of 1872 lays down the fundamental necessities of a legally binding agreement or contract:

  • There must be an offer delivered by one party and received by another
  • The consent of the parties must be free and not affected by fraud, coercion, or undue influence
  • The parties must be qualified to enter into a contract. This means that they must be more than 18 years old, must be of sane mind, and not considered as insolvent/bankrupt
  • There must be a lawful consideration
  • There must be a lawful object
  • There must be an intention to foster a legal relationship.

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