Third-party relationships – for licensing of IP or for distribution, agency or franchise – are an essential component for many business models.
Just as carefully as the organisations with whom you decide to investigate a relationship should be vetted, the precise terms of your affiliation must be meticulously considered and documented.
Those terms must clearly articulate the benefits you expect to receive, how you will receive them, the duration of the licence and the respective rights and obligations of each party including in relation to risk, indemnity and payment.
If the relationship provides a “benefit or facility” to either party, the Australian Consumer Law unfair terms rules will likely apply if either party is a small business (less than 20 personnel whether full time or part-time).
If the relationship allows for the resale of goods, the statutory guarantee provisions of the Australian Consumer Law relating to fitness for purpose and suitability to achieve the desired outcome, will in many cases apply.
- Licensing of Intellectual Property – It goes without saying that if you wish to allow others to use your brand, trademark or business name, such rights should be clearly documented. Many business owners like to isolate such intellectual property from day-to-day business risks by owning it in a separate entity to that operating the business. To complete the asset protection value of such a measure, the right to use that IP- which can even extend to software customisations, domains, websites and web content – should be accurately documented. The licensor will need to consider taking security over the IP it allows the licensee to use, e.g. a PPS.
- Distribution Agreements – Along with the significant financial rewards associated with many distribution arrangements comes significant responsibility. Apart from fundamentals like the extent of the Territory and sales KPIs, most agreements require the distributor to be responsible for all marketing, delivery, installation and maintenance. They demand high standards of customer service, regular reporting and the establishment of facilities for stocking inventory and performing repairs etc. It is important that such relationships are documented or negotiated by an experienced business lawyer.
- Agency agreements – Businesses frequently conduct an aspect of their business through an agent or representative rather than an employee. Because such relationships are easy to establish and are so commonplace, attention to detail is often lacking in establishing the terms upon which the representative should operate. The optimal format will depend on the nature of the goods or services being supplied or performed and the role that you desire the representative to carry out. Poorly documented representative arrangements can be a significant financial risk to your business.
- Franchises – Franchise Agreements and Franchise Disclosure Documents should be carefully scrutinised for their legal and commercial implications. As with many standard form arrangements, an ounce of scepticism is worth a pound of disputation. For more information on franchise agreements, see our Franchise Agreements page.
- Non-Disclosure agreements – Before you share your creative ideas with someone interested in buying or exploiting it, be sure to get them to agree in writing not to cut you out by copying or re-engineering your work product. A comprehensive non-disclosure agreement limits the use your prospect may put the information you provide to them to the consideration and assessment of whether to enter into a commercial transaction with you. It also prohibits the use of your ideas, methods or designs for the re-creation emulation or construction of their own version of what you disclose. Non-disclosure agreements are quick and inexpensive to prepare. Having one signed by your potential buyer or collaborator should be the first step in your discussions with them.
For an obligation free appraisal of your current Third-Party Business Agreements, please email your current documentation to our Brisbane team who can provide a competitive estimate of fees to implement any recommended changes.
Supply of Goods + Services liability assessment tool: Interactive assessment tool
To identify sources of potential liability under statutory guarantees and to score your risk of a potential challenge to unfair terms or the potential for claims in relation to statutory warranties, go to our Supply of Goods + Services: Liability Assessment Tool.
How can our Business Lawyers Brisbane help?
We can help you with existing or proposed contracts by:
- Drafting new agreements specific to your business;
- Improvements to your business agreements;
- Review and advise on contractual and other legal risks to your business;
- Advice on the enforceability of contracts;
- Urgent action to prevent contract infringements;
- Securing payment and assets by way of Personal Property Security.
If you want to discuss how we can assist you with your documented business relationships, please contact us today.