When you start collaborations with new partners 💍 you have to think about the partnership contract. Today, that’s exactly what we’re going to talk about. Hang on, it’s going to send some heavy stuff.
On the program of this article :
- The definition of a partnership agreement.
- Why do you need one?
- What are the key elements.
- How to write it.
- Free partnership templates.
- Our tips for drafting.
What is a partnership agreement?
Before we fully immerse ourselves in the drafting of a partnership contract, let’s talk about its definition and objectives 🏆 of it.
A partnership contract is a formal agreement between two parties to work together toward a common goal. It can be used in many contexts such as:
- Business 🧳.
- A nonprofit organization.
- Research projects.
In a partnership contract, the parties agree on the terms and conditions of their collaboration. They will then define the objectives to be achieved, the deadlines ⏳, the resources they will have to use as well as the means of communication. The parties can also define the modalities of sharing costs and benefits.
Be aware that a partnership contract can take different forms depending on the nature of the collaboration. For example, it can be a partnership agreement between two companies seeking to strengthen their market position by sharing resources and skills. But it can also be a partnership between a business and a non-profit organization to work together on a social or environmental project 🌳.
The objectives of the business partnership agreement
As you can imagine, the objectives of a partnership contract are multiple and can vary depending on the context in which it is used.
One of the key objectives of the partnership contract is to clarify the expectations and commitments of each party. You will then define:
- The roles and responsibilities of each party.
- The terms of cost and benefit sharing.
- The deadline for the mission(s).
- The different means of communication.
The objective, by setting up, a partnership contract, is to reduce the risk of conflict or misunderstanding. You will thus promote an efficient and durable collaboration 🤝 by working within a clearly defined framework. This can therefore help strengthen your market positioning and improve your impact whatever the field.
Why do you need a partnership agreement?
To establish a business relationship (or not), a partnership contract is necessary to formalize and frame a collaboration between two or more parties, clarify expectations and commitments, minimize conflicts, and foster an effective and sustainable collaboration to achieve the objectives ✅ you have set.
5 benefits of setting up a partnership contract
Setting up a partnership contract can be very beneficial 😍 to your business. To encourage you to do so, here are 5 benefits:
Would you be foolish to pass this up? Unless the downsides make you cringe. But we’ll talk about that.
And the drawbacks?
As you can imagine, there are not only advantages to doing a contract 📄 partnership. In order for you to make a fully informed decision, here are the disadvantages you may see coming your way:
💡Good to know: Be aware that the length of the partnership can vary depending on needs and goals. So, you can enter into it for a limited time, such as the duration of a specific project or for a longer period such as several years.
You can include automatic renewal clauses or early termination clauses in the contract in order to adapt to market changes for example.
Key elements of a partnership contract
The essential elements to include in a contract: the parties, the purpose of the contract, the obligations of the parties, the financial conditions, the duration of the contract, the termination terms.
Depending on the objectives you have in mind, some elements may vary. However, here are the elements that will most often appear in a contract:
The contract should clearly identify the stakeholders involved in the partnership and their respective roles and responsibilities. Basically, the stakeholders are the actors who are involved in the partnership. These can be:
- A company 🏢.
- An association.
- Or individuals.
The contract must clearly identify their respective roles, responsibilities and contributions. They must be clearly defined at the beginning of the partnership to avoid any risk later on.
In this contract, it is important to specify the objectives and the expected results. This is what will allow you to clarify the expectations and expected results of the partnership. Objectives may include:
- New product development.
- Expansion into new markets.
- Optimization ⚙️ of new processes.
- Research and development.
- Improvement of the quality of products or services.
By implementing this step, you will better align your efforts and resources to achieve the desired results.
In your contract, you will need to list the obligations of each party. This will define the commitments of each party such as the financial 💰, human and material resources that will be made available for the partnership, the deadlines to be met, the expected results as well as the responsibilities of each.
There may also be clauses relating to the protection of intellectual property, confidentiality of information or a non-competition clause.
Each party will commit to providing the necessary conditions for the proper execution of the contract. We can mention resources such as :
- Investments 🤑 in capital.
- Specialized knowledge in a field.
- Infrastructure or equipment.
You have defined your objectives, your different resources and your obligations, now you have to think about the price. How will you frame this business partnership contract? You will have to think about several things, especially when it concerns goods or services. You need to specify the payment terms, the invoicing terms, the deadlines and the penalties applied in case of delay.
The price can be fixed in several ways, such as a lump sum payment or with commissions on sales. It is necessary that the fixed prices are balanced ⚖️ for the two parts without which you risk putting in danger the perenniality of one or the other part. You can of course foresee price adjustments in case of changes in production costs or market conditions.
We’re not talking about buttons 🧇, obviously! The duration of the assignment/contract should be stipulated and mention if there is a renewal or not.
#7 Intellectual Property
When drafting your contract, it must be specified the intellectual property of the products, technologies, brands or other assets developed within the partnership.
Free partnership agreement templates
Want to know what a partnership agreement looks like? We give you two examples for the sports club and the commercial partnership that you can also download and modify at your convenience.
Example of a partnership contract for a sports club
If you want to establish a partnership contract for a sports club, you can find the model here 👇. You can modify it and download this partnership contract in PDF.
Download here 🔥
Commercial partnership contract: Simple and free template
To help you start a commercial partnership contract, you can download it in PDF and modify it as you wish on this link below.
How should it be drafted?
The drafting of this type of commercial contract can be complex and requires that you have a methodical approach. In order to draft it, we are going to repeat the elements we discussed earlier in this article.
You are not obliged to proceed in one way or another since the commercial partnership contract is free to determine :
- The partners 🏽🏽.
- The objective set.
- The means used to achieve it.
Now that we know this, we will have to put it in place. As we mentioned earlier, the elements that are essential to the proper drafting of your contract must be :
- The establishment of the parties involved in the project.
- The purpose of the contract.
- The obligations of the parties including the common obligations and the obligations of the provider concerning the personal data or the obligations of the client.
- The remuneration (you will put the payment terms in this part).
- The duration ⌛ of the contract as well as the mention of its tacit renewal or not.
- A part on the termination of the contract (by communicating well on the modalities of its closing).
- The mention concerning the applicable law and the jurisdiction.
- The signature of both parties in duplicate.
You can also put in place specific clauses that allow you to fine-tune your contract, also called special provisions. We give you an example.
To help you understand what a clause is, here are two examples that you can use:
Summary table of essential clauses
Here, just for your eyes 👀, is a summary table of the various essential clauses for your contract! 👇🏼
|Parties||The names and complete contact information of the parties involved in the partnership.|
|Purpose of the Partnership||A detailed description of the partnership’s objective, including the responsibilities of each party.|
|Duration of the Partnership||The period during which the partnership will be in effect, along with renewal or termination terms.|
|Contributions||The resources, skills, assets, or services that each party brings to the partnership.|
|Management and Responsibilities||The specific roles and responsibilities of each party, as well as mechanisms for decision-making and conflict resolution.|
|Confidentiality||Commitments regarding non-disclosure of confidential information between the parties.|
|Intellectual Property||How intellectual property rights will be managed, shared, or protected within the partnership.|
|Termination and Exit Provisions||Conditions and terms for prematurely ending the partnership, as well as potential financial consequences.|
Mistakes to avoid when drafting a partnership agreement
With what we have just said, here are the mistakes not to avoid:
- ❌ Not clearly defining everyone’s roles: indeed, it must be clear who the actors involved are.
- ❌ Having confusing goals: both parties need to agree on and understand the goals of the partnership in order to measure the success of the partnership.
- ❌ Failing to define the conditions for termination of the partnership: it is important to provide for the conditions of termination of the partnership. If the parties are not satisfied, they must be able to effectively terminate it within the terms of the contract.
- ❌ Do not use a specialized lawyer: Drafting a partnership agreement can be complex and sometimes requires specific legal knowledge. You should not hesitate to get help when you feel the need.
We are coming to the end of this article 🙁 and we were able to discover several concepts that will be useful for you when writing a partnership contract. We were able to see:
- 🟣 The definition of the partnership contract as well as its objectives.
- 🔵 Why to put it in place.
- 🟣 The advantages and disadvantages of a partnership contract.
- 🔵 The key elements of a partnership contract.
- 🟣 How to draft it.
- 🔵 The models.
Here are a few concepts that may be useful to you to perfect your knowledge.
How to terminate a partnership contract?
When you want to end your contract, you can’t do it just like that or from one day to the next unless your contract has come to an end and you don’t want to renew it.
On the other hand, you must respect the notice period mentioned on your contract if you have an open-ended contract. It can be cancelled at any time by both parties. However, respecting the notice period is not negotiable. This duration may vary depending on the business relationship as well as the notice period.
Here is an example of a breach of contract:
Purpose: Termination of the partnership contract.
The contract will therefore be terminated on (date of termination) after the three months’ notice we are required to give. According to the provisions of clause no. X, the termination of this contract will not result in any penalty or damages.
We offer you some advice:
- ✅ Know the applicable legislation: depending on the country you are in, the product or service you are going to sell, it can be good to know what the legislation is about it. Of course, several factors are to be taken into consideration including the nature of the contract, the parties involved, the place of execution, the laws in force…
- ✅ Include non-compete and non-disclosure clauses: These clauses are often included in business partnerships to protect the interests of the company or freelancer. The non-compete clause prohibits a party from working for a direct or indirect competitor of the company for a specified period of time after the contract ends. The non-disclosure clause prohibits the disclosure of confidential or proprietary information of the company to third parties during and after the term of the contract.
- ✅ Hire an attorney or legal counsel: If you are unsure of where you are going when drafting your partnership agreement, you can (and in fact should) hire a legal attorney. This ensures that the contract is legally sound and meets the requirements of the parties involved.
Public-Private Partnership Contract
A public-private partnership contract (also known as a PPP) is an agreement between a public entity and a private company to carry out an infrastructure or public service project. PPPs allow the risks, costs and benefits to be shared between the two parties. They are regulated and supervised by law and tendering procedures are generally used to select the partner companies.
And that’s it for this article, you now know everything about the partnership agreement.