The success of a contractual joint venture hinges on the level of trust and transparency between the parties involved. Hence, your priority should be formalizing your collaboration using a written collaboration agreement. 

Getting this agreement right from the onset helps prevent misunderstandings and keeps your partnership running smoothly. It’s your roadmap to clearly define how you and your partners will collaborate on a specific project or campaign.

This blog will cover all about collaboration agreements, including key clauses, provisions, templates, and best practices.

TLDR

• A collaboration agreement gives all parties a legally binding framework when they work together on a commercial project.
• There are four types of collaboration agreements: Contractual Project-Based, Joint Venture, Service-Level Agreement (SLA), and Memorandum of Understanding (MoU).
• In this legal contract, you must clearly define roles, responsibilities, goals, financial terms, timelines, IP ownership, dispute resolution clauses, and governing laws.
• Drafting this collaborative agreement is vital for avoiding disputes, ensuring compliance, resource optimization, and risk management.

What is a collaboration agreement?

A collaboration agreement is a legally binding contract between at least two business parties looking forward to forming a contractual joint venture. It offers you and your collaborators clear guidelines on roles, obligations, expected outcomes, financial arrangements, project schedules, and potential risks. 

Hence, organizations or individuals will cooperate with you while working together as per this duly signed formal agreement.

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Source: Andrea Smile Carvajal via LinkedIn

How to Create a Collaboration Agreement + Free Template

Here are quick steps to help you understand how to draft a formal collaboration contract.

• Clearly state the goals and scope of the project.
• Include full legal names, addresses, and contact details of all parties involved (individuals or entities). Also, specify if any party acts as a business (e.g., LLC, corporation).
• Specify what each party contributes, such as funds, labor, equipment, intellectual property, or expertise.
• Address ownership of jointly created assets, i.e., patents, copyrights, and trademarks.
• Include a confidentiality clause to protect sensitive information and IP.
• Outline how you will divide profits, losses, and expenses.
• Specify payment schedules and distribution methods.
• Establish the duration of your collaboration.
• Define termination conditions, such as breach of contract, insolvency, or mutual consent.
• Outline exit procedures.
• Choose the governing law.
• Define whether disputes will be resolved through mediation, arbitration, or litigation.
• Negotiate and make revisions based on final feedback from all the parties.
• Ensure all parties sign and date the agreement.

Remember, the agreement's exact terms and scope will depend on your industry and the nature of the project. 

Types of Collaboration Agreements

There are various ways to formalize your collaborative efforts, which you can use based on your business goals, scales, and levels of commitment. There are four types of collaboration agreements:

1. Contractual Project-based Collaboration:

Under this agreement, the parties maintain their independent legal identities until the project ends. You can choose this legally binding contract to collaborate with parties on a specific project or purpose. 

2. Joint Venture Collaboration Agreement:

‍This agreement is ideal for large-scale joint ventures or partnership firms requiring substantial investment and long-term commitment.

3. Service-level agreement (SLA):

This type of agreement covers specific targets or performance metrics that a service provider must fulfil. SLAs summarize the level of service offered by one party to the other during the collaboration. 

4. Memorandum of Understanding (MoU):

An informal agreement to establish common ground and mutual understanding by defining the objectives of your collaboration. You can generally use MOU at the early stage of cooperation.

Choosing the correct contract will allow you to define your collaboration framework and legal protection. For example, a tech startup will need a contractual project-based agreement, a renewable energy company can sign a joint venture contract with a construction company, SLA is good for corporation contracts with a cloud service provider, and MOU will be ideal for academic research collaboration.

So, let’s understand the significance of these agreements in securing you and your business.

Also read: What is a Memorandum Of Understanding (MOU) and why is it important?

Why is a Collaboration Agreement Important? 

A legally binding collaboration agreement ensures compliance with the governing laws. Hence, this formal contract allows you to successfully maintain commercial partnerships in a market with various regulatory challenges.

Failing to draft a collaboration agreement can lead to financial risks and potential liabilities for your business. If things go wrong, your brand reputation could also be damaged.

Thus, a well-defined contract regulates the relationship of collaborators working on a project together. Providing clarity and structure to the businesses reduces the probability of disagreements between collaborators. In the event of conflicts, it’ll also be easy for you and your stakeholders to manage the situation.

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Source I Dr. Franziska E. Höhne via LinkedIn

Also read: How to Review Joint Venture Collaboration Agreements: A Comprehensive Guide

Benefits of Signing a Project Collaboration Agreement in Detail

1. Risk Management

You can manage risks and avoid potential unpleasantness by entering a legally binding contractual joint venture that outlines responsibilities, rights, conflict resolution terms, confidentiality, financial provisions, and termination clauses. This level of transparency allows you to proactively identify and address operational, financial, or strategic risks across all business areas.

“While the company wants you to spot every risk, doing so is impossible. In order to make it manageable, you need to know what types of risk are most important to the company and where to look to get information about those risks.”

~Sterling Miller, CEO and Senior Counsel Hilgers Graben PLL
‍Ten Things: Spotting, Analyzing and Managing “Risk

2. Reduced Non-compliance Issues

After signing a collaboration contract with well-defined terms and provisions, every party adheres to regulatory requirements. Thus, there will be fewer chances of breaches, reputational damage, and costly penalties. To keep the agreement aligned with industry standards, you can use tools like SpotDraft’s VerifyAI to track and check compliance in real-time. 

Also read: How to Review Business Partnership Agreements: A Comprehensive Guide

3. Resource Optimization

A clearly defined agreement also means parties will be transparent about the resources they contribute during the commercial partnership, including capital, expertise, technology, data, and market access. Optimizing resources opens new growth prospects for collaborators that might have been beyond their scope and capabilities otherwise.

Key Terms of a Collaboration Agreement

Your collaboration operates smoothly when you add the appropriate clauses and provisions. Here’s the checklist of terms you must add to your collaboration agreement to foster productive and mutually beneficial partnerships. 

1. Definitions

In the initial clause, you’ll specify key terms used throughout your collaboration agreement, such as “project,” “focus,” “confidential information,” “intellectual property,” “deliverables,” and “project period.” These clear definitions not only ensure clarity but even remove any chances of disputes due to misunderstandings.

2. Purpose

The purpose clause guides collaborators to work towards achieving the agreed objectives. So, clearly define your collaboration's primary goals, milestones, and expectations so that all parties remain on the same page during the project. 

“The first thing is to make sure you delve deeper into the business and the product. And then understand the strategic initiatives for the business. What is the business trying to accomplish? What are their goals, objectives over the next two quarters, four quarters, or six quarters? You can then focus your efforts and energies on ensuring that you're helping move the company forward with those objectives and goals.”

~Adam Glick, ex-Head of Legal, Intercom, 
Building a Legal Function From Scratch: Insights from 8 GCs and Heads of Legal

3. Details of Collaborating Parties

Set out the names, addresses, and other details of the individuals or businesses collaborating on a project. If you propose a collaborative project, you’ll be called the “proposing party”, while the other party is termed the “receiving party” in the agreement.

4. Roles and Responsibilities

You should add clear clauses defining the roles and responsibilities of each party involved to prevent conflicts and ensure smooth project execution. In this section of your collaboration agreement, include the following key elements:

• Who is part of the collaboration?
• Who is responsible for which tasks?
• What are the authority and decision-making powers of each party?
• What resources will each party contribute?
• What performance metrics will collaborators adhere to?
• Who owns what percentage of profits?
• How will someone leave the collaboration?

5. Ownership of Collaboration Intellectual Property (IP)

Your written agreement must also define collaboration IP with other party or parties when you work together on a creative project or invention. Simply put, the “Ownership of Collaboration IP” section deals with who owns what in their project. 

Let’s say you’re a writer and you collaborated with an illustrator named Mike to create a children's book together. There are three ways to handle the IP ownership of this collaboration:

1. Individual Ownership:

You own the story, while Mike owns his drawings. You can give each other permission to use the work for the book. Both parties can decide if this permission is exclusive (meaning you can't use this story elsewhere) or non-exclusive (you can use this story in other projects).

2. Joint Ownership:

‍The book project as a whole owns both the story and drawings. However, this can get tricky if you and Mike only plan to work together temporarily. So, you must decide what happens to the ownership rights after the contract ends.

3. Third-Party Ownership:

You and Mike could create a small company, "Kids Nightime Story Books LLC," and give this company ownership of both the story and drawings. This company will now own everything related to the book.

Also read: How to Review Intellectual Property (IP) Licensing Agreements: A Comprehensive Guide

6. Confidentiality

With confidentiality provisions, you can prevent unauthorized disclosure of sensitive information shared during the joint venture, such as trade secrets, client data, or proprietary methods.

So, ensure that you outline what constitutes confidential information, the responsibilities of each party to protect those details, and how any existing and new intellectual property will be treated. You can also consider signing a Non-disclosure Agreement (NDA) before disclosing sensitive business information.

Also read: The Ultimate NDA Checklist: Draft, Review & Sign NDAs with Confidence

7. Non-solicitation

In a joint venture, other personnel of each party will work together. This may raise the concern of poaching an employee from the other collaborator’s team. 

Here, you need a non-solicit clause to prevent one party from soliciting the other party's staff for the duration of this agreement or up to a certain period after the contract ends. Make sure to keep the restriction period at a reasonable length rather than indefinite.

8. Financial Terms

Next, define the financial arrangements between you and your collaborators to avoid any conflicts in the future, including project budget, cost-sharing, payment terms, and funding commitments. In this section, you must also mention how and when payments will be initiated.

9. Penalties and Dispute Resolution

Sometimes, disputes can happen in a collaborative business venture. That said, be prepared beforehand with a predefined resolution mechanism to save money, time, and professional relationships.

So, define the provisions to resolve disputes, such as mediation, negotiation, arbitration, or litigation. Additionally, specify the governing laws and jurisdiction under which the resolution will be processed.

10. Duration and Termination

Firstly, specify the timeframe of your collaboration, including the start and end dates. 

You can also add a clause that either collaborator may end the agreement at any time by providing notice per this section. Ensure that the scenarios in which either party may terminate the collaboration are outlined and their rights and obligations on termination are set out. Additionally, include the conditions for termination, i.e., mutual consent, unforeseen situations, or breach of terms.

Best Practices for Drafting Collaboration Agreements

Follow these best practices while preparing collaboration agreements to get the most value from your partnership.

1. Discuss and Negotiate:

In the initial phase, you must thoroughly discuss the objectives, expectations, requirements, and conditions with all collaborators. The goal is to stay on the same page from the beginning.

2. Contract Clarity:

‍Your agreement clauses should always be in clear and consistent language. So, leave no room for ambiguity, confusion, or misinterpretation by explicitly defining every term and provision in your collaboration contact. 

‍“Even though you’re from legal, you can't speak legal jargon in meetings. Translate your legal opinion to an easy-to-understand business rationale. And for this, legal counsel needs to learn relevant business terms and KPIs. Translate into their terms, not just yours.”

~Ryan Nier, General Counsel at Pinwheel
Putting Legal on the Map in a Hypergrowth Startup

3. Anticipate “What Ifs”:

You can avoid disagreements when you stay realistic by including clauses for termination, dispute resolution, and force majeure (i.e., natural calamities).

‍4. Applicable Law:

‍Before you draft the agreement, determine the governing law and jurisdiction to stay compliant and avoid potential conflicts during the joint venture.

5. Get e-signatures:

Simplify and fasten the signature process with legally binding e-signatures. E-signature tools like VeryfAI by SpotDraft collect signatures across all devices and formats.

‍6. Review with a Lawyer:

‍Protect the interests of all stakeholders and foster better relationships by seeking a legal professional’s input. A lawyer will help you identify potential gaps and compliance issues with local laws.

‍7. Use a Contract Management System (CMS):‍

A CMS enables you to maintain consistency and compliance with legal standards. You can use SpotDraft’s CMS to draft, edit, e-sign, store, and manage agreements securely. 

“Leveraging a CLM has been key because it has reduced a lot of friction from handoffs between legal and business. Rather than going back and forth over email, Slack, Word, Zoom, DocuSign, and a whole tech stack, the CLM acts as a single source of truth.”

~Jonathan Franz, Head of Legal, Crunchbase
‍Navigating Economic Turbulence and Thriving in Chaos

Make Partnerships Successful and Protect Everyone’s Interest With Collaboration Agreement

A detailed, legally binding collaboration agreement is a blueprint for your joint project that clarifies why the parties partnered. Once collaborators sign this contract, they commit to keeping their promises. Moreover, covering all relevant aspects of a collaborative venture will safeguard you and other parties from potential conflicts and disagreements in the long run.

Are you ready to improve efficiency and minimize the risk of errors? Draft your first collaboration agreement with SpotDraft in minutes.

FAQs

1. What are the 4 types of collaboration?

The four main types of collaboration are strategic partnership, team collaboration, cross-functional collaboration, and joint ventures.

2. Are collaboration agreements legally binding?

Yes, collaboration agreements are legally binding contracts with clearly defined terms and clauses between two or more parties. So, if one party fails to meet its commitments, the other party can seek legal remedies.

3. Do collaboration agreements expire? 

Yes, collaboration agreements can expire based on the predetermined termination period outlined in the contract.