Why a Written Partnership Agreement Is Essential to Avoid a Business Partnership Dispute

When setting up a brand new business partnership, the last thing you will be considering is the possibility of a dispute arising in the future.

But it is often the case that partners will blame each other if a business fails to prosper, and this will inevitably lead to a partnership dispute. Whether it's a partnership of solicitors, accountants, or even GPs, it is therefore essential for all partners to have a written partnership agreement drawn up by a solicitor who is experienced in this field.

Although a written partnership agreement is not a legal requirement, it is essential for all involved to protect themselves from any future business partnership dispute or legal action. You will naturally not expect any problems of this kind when the business is starting, but none of us can see into the future, and it is only sensible that both you and your partners know where they stand. But what should you include in you partners agreement.

It should, of course, be an agreement on which all involved are decided. The business will not run smoothly if any of the partners are unhappy with the agreement. But there will probably need to be an element of compromise from all partners, and the way that the partners work together when drawing up a partnership agreement will be a good indication of the way they are willing to work together in the future, through good times and bad.

Above all, a written partnership agreement is there to protect and safeguard the partners. Having a written and legal document will set out exactly where each of the partners stands, their share of the investment and their responsibilities. Any business partnership dispute which may occur in the future can be largely avoided if the terms of the agreement are adhered to.

Of course, the written partners agreement need not be set in stone. As your business grows, individual circumstances will change, and things that were not thought about at the time of the agreement being drawn up may have to be included. This is just one of the benefits of a written agreement. It is flexible, and can be amended at any time, but it is the most sensible course of action to make sure that all partners' responsibilities and roles are set out clearly, to avoid future misunderstandings or business partnership dispute which would have arisen if any partner were not clear about what was expected of them, and what they expect from each other.

If you are going through a partnership dispute, contact Bonallack & Bishop. They are a firm of business partnership dispute lawyers. Senior Partner Tim Bishop is responsible for all major strategic decisions. The firm has grown by 1000% in 13 years.

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No Win No Fee Agreement Makes the Legal Process Easier

People who suffer accidents lead a stressful life. They are not only tense about their injuries, but also about the financial loss they suffer. The hefty fees they have to pay their lawyer for filing their claim is an additional concern. However, the no win no fee system came as a great relief for all those who want to have justice and have legal aid.

Also known as the contingent fee agreement, the system came into existence in late 90s.Under this kind of settlement, a solicitor does not get fees if he loses the case. However, if he wins the case he is permitted only to take his success fee or legal fee, from the trailing party or their insurance company. This kind of accord helps reducing the financial pressure on the claimant, as he gets back his full compensation without paying a single penny.

The interesting fact is that before 1998, legal help under this clause was available only to few eligible claimants; others had to shell out money from their pockets. However, after the introduction of this system, the monetary load was removed from the shoulders of the plaintiff and people could go for no win no fee solicitors for most of their personal injury claims.

There is no denying that this kind of settlement between a plaintiff and a lawyer, gives him an entry to courts, and as a claimant you don't have to worry if you can afford the solicitor's fees or the costs of civil proceedings and lawsuits. However, it has its own set of positives and negatives. The biggest plus point is that you don't have to shell out a single penny on the lawyer. You will not have to bother about the legal fees. The solicitor fighting your case has a very strong inspiration, drive and enthusiasm to win you case.

There are not too many drawback though, the major being that, because the solicitor will not be sure about how tricky the case can get, he might end up being in charge of the things, and he might decide the direction of the case and related things.

The fact can not be overlooked that once you enter this deal, you are ought to find both the advantages and the drawbacks of the no win no fee concord. But then, there is no denying that it is always better utilized in certain cases. It is always better to make this decision after thinking about the interest and profit of the offending party.

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Service Level Agreement

The most common types of service agreement include; (1) Outsourced Support Agreements: service desk, IT technical, design development support, programmers support and (2) Uptime Agreements: determines the percentage of network uptime, power uptime, etc. SLA objectives to achieve the desired results of the service agreement must be clearly defined by the client and understood by the service provider. The SLA lifecycle provides the processes involved in managing the services driven transaction.

In a typical SLA it is recommended that four critical components be included; (1) description of services to be provided; (2) objectives that client wants to accomplish; (3) measurement of performance levels, which are what to measure i.e. cost of services or quality of services, who will measure, how it will be measured and how often it will be reported; and (4) design a penalty/incentive system by defining what is bad/substandard service and superior service, what is the tolerant level of such bad/substandard service and when is superior service can be rewarded.

It is not sufficient merely to list the issues the SLA is intended to address. You also need to define specific and measurable service level objectives, performance indicators, description of services rendered in order to set an objective standard to determine whether the various service conditions are met. For its part, the service provider benefits from a clear set of expectations rather than having to guess the client's expectations or be held to a vague set of service conditions. Be precise about the details and "what-ifs" up front.

The following are important to ensure that a meaningful SLA is negotiated; (1) provable indicators that measure the right performance levels to ensure that the client is receiving its expected level of service, example: efficiency, effectiveness and quality; (2) the client and service provider are able to achieve an acceptable level of profitability and increased productivity; (3) performance productivity can be easily collected with an appropriate level of detail but without costly overhead; and (4) bind all commitments/objectives to reasonable, attainable performance levels so that good service can be easily differentiated from bad/substandard service and allowing the service provider a fair opportunity to satisfy its client.

The principles in the contractual nature of the SLA are; (1) Flexible - able to change as needs, priorities, products, and technologies change; (2) Responsive - able to meet client's needs; (3) Timely - able to stay on schedule; (4) Motivate the right behaviour-is it to reduce costs or obtain new skills or improve production quality; and (5) Adopt reasonable metrics - able to measure service and such metrics within service provider's control and reward accordingly.

SLA is a living document that needs to be reviewed constantly to ensure that the service level objectives remain valid and kept current on an ongoing basis. It is advisable that the same teams from both parties oversee the negotiations and execution of the SLA and thereafter the management of the SLA to ensure that any change to the SLA objectives can be made without major confrontation and encourages both parties to demand continuous improvements from the SLA. This may be achieved by including a variation clause to practically reappraise the SLA on what are the service commitments that are acceptable and what are not acceptable.

The variation clause may be in the form of incorporating floating performance commitments by doing this may allow the client to conduct such reappraisal on the SLA on an ongoing basis.

The floating performance commitments may be through the following methods; (1) Contractual increase- whereby the SLA may have a fixed schedule of increasing requirements; (2) External indicators - the service levels to be accepted can be based on the best industry standards of acceptable or achievable performance; and (3) Service provider's performance - the SLA can increase the performance requirement based on the service provider's actual performance. For example each year the minimum service level indicators or the target service level indicators may be increased by a percentage of the amount which the service provider's actual previous year performance exceeded the target performance set according to the minimum service level indicators or the target service level indicators.

By incorporating a variation clause in the SLA will allow the floating performance commitments be effectively accommodated for in the event following the reviews conducted on the effectiveness of the SLA it is found that the performance requirement needs to be enhanced. This may assure the client's requirement of demanding continuous improvement on the services it contracted for.

Warranties and liabilities must not be taken lightly in a SLA. The warranties must be specific in allocating the responsibilities and to ensure that the parties are committed to assume those responsibilities. Each of the responsibilities of these parties must have a corresponding warranty that warrants the responsibilities to remain available throughout the term of the SLA.

One of the consequences of non-performance of those warranties may result that a party or all parties being sued by a third party claimant for negligence either jointly or separately. The purpose of having a warranty clause is to establish the right of one party to be reimbursed by the other party for losses, claims and expenses to settle a claim for damages made by a third party. Without such provision each party will be responsible for its own negligence and share any joint of negligence.

Assumption of the above liability may cause financial implications on both parties and it is during the negotiation process that the purpose of the clause can be applied to address whether to exclude or cap the service provider's liability to the best possible extent allowed.

Another consequence of non performance of warranties is not achieving the minimum service level that is in the SLA. The performance level is sometimes referred to as performance warranty. Performance indicators must be defined objectively and realistically to reduce disputes over measurements. It is imperative a calculation of penalties and incentives be defined and the method of calculation be incorporated in the SLA. The main principle is to fairly and consistently apply these incentives and penalties in an effective manner.

The following types of incentives may be considered; (1) Gain-sharing - the service provider receives a portion of any additional savings it can generate for the services rendered through its efforts; (2) Achievement Bonuses - one-time payments provided for reaching certain objectives; and (3) Performance-based Pricing - when performance in a given time period exceeds some specified criteria, additional payments apply; when it falls short, penalties are imposed.

Different types of penalties that may be imposed include; (1) Liquidated Damages/Cash penalties; (2) Performance Rebates/Credits against future payments; (3) Delayed payment (4) Financial Guarantee; and (5) Performance Guarantee

Such penalties must be used only to protect the most critical items to the business. Penalties must be tightly tied to measurable performance items so that failure to meet the performance requirement is unambiguous. If the SLA has penalties (in the form of liquidated damages) non-performance can be costly. This is something the service provider will try to avoid.

Rather than commencing legal action to recover damages and to reduce administrative costs in contract management, incorporation of a penalty clause is increasingly common these days. However the penalty clause incorporated in the agreement must be drafted to ensure that it must not be a "penalty" within the Contracts Act 1965. A penalty clause is unenforceable in Malaysia.

A penalty is when the court finds that the real purpose for which the term was that its burdensome, excessive or oppressive character may operate to extort the other party so as to drive him to fulfill the contract, then the term will be considered to be one by way of penalty. A penalty occurs when payments were agreed upon in advance that were not a genuine pre-estimate of damage arising from a breach of obligation.

Where a party has made a genuine effort to determine their loss and has acted in good faith, the clause will not be classified as a penalty regardless of how unreasonable it may appear to others. As a matter of public policy, terms of agreement cannot be used by a party to profit from the breach of an agreement by the other party.

In negotiation it would be advantageous to the client that the service provider understands the client's demands for good quality, availability and reliability service and that immeasurable warranties are not acceptable.

It is advisable that the service provider is required to provide end-to-end warranties in the event of service outage by having immediate restoration, taking full ownership and responsibility in the event of bad/substandard service. It is also important that the client is aware what the warranties cover and when exactly the warranties begins and end at the onset of the negotiation process.

The SLA must be simple, measurable and realistic. This creates clarity, dispels ambiguity and keeps the negotiation process simpler. With realistic objectives in placed will ensure the same be achieved easily and the penalties imposed can be limited.

A SLA may contain standardized provisions and such obligations imposed must be understood clearly. Some standardized provisions may impose terms and conditions which are not favourable to the party. If these provisions contain unfavourable terms and conditions the party may not want to assume such obligations as it may expose the said party to undesirable obligations to perform certain responsibilities that may be detrimental to the said party.

The SLA must act as a tool to obtain maximum and continuous quality of service, value to both parties, minimize business risks and have clearly defined components in ensuring a win-win agreement is achieved. The ability to minimize business risks and protect the party's interest will depend on the bargaining position of the party, the type of services being contracted for and the skill in writing SLAs. The SLA must be mutually agreed and not be contracted unfairly for the benefit of one party. Both parties must be prepared to anticipate the worst possible scenarios that may occur in the event their relationships turn sour.

As such the SLA must provide for any future events that may creep up once the agreement has been entered. Not only the SLA is able to anticipate future events but it must also provide the contingency plans to address the occurrence of such future events.

To sum up, it may be advantageous that the following elements are also captured in the SLA accordingly; (1) Reporting - once the services have been described, the objectives and type of measurements are agreed upon it is advisable that a defined measurement period be set to measure whether required or expected level of service are achieved by the service provider. Further the SLA must provide whether the measurement period include times when force majeure occur or does it include periods when the service demand exceeds the minimum or targeted levels; (2)Reviews - to conduct regular reviews to evaluate the SLA since the nature of technology and other advances in systems and processes are constantly evolving and improving. It is advisable that such reviews be conducted every 6 months to 1 year; and (3) Change Management Process - change procedures must be agreed upon by both parties and documented in the SLA. These change management procedures are required to facilitate any change that may be required to the SLA during the term of the agreement.

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CFPB Publishes Sample Credit Card Agreement for Dodd-Frank Act Compliance

The Consumer Financial Protection Bureau (CFPB), the watchdog agency newly created by the Dodd-Frank Act, has issued a proposed new credit card agreement form that strips out much of the legalese used in current credit card agreements. At this point, the new form is not mandatory nor is it a model form, merely a suggested prototype.

The CFPB is currently testing the prototype with the more than one million member customers (including 350,000 cardholders) of the Pentagon Federal Credit Union, and plans to work with other card issuers who are interested in making simplified credit card agreements more prevalent in the industry.

The new credit card agreement form, published on the CFPB's official website, is designed to help consumers who might not understand legalese to better understand what they are agreeing to when signing up for a new credit card. The prototype form contains several key changes from current boilerplate credit card agreement forms:

Begins by explaining the various charges and interest rates in clear termsSeparates legalese into a standardized definitions section based on current industry standardsUtilizes "FAQ"-style sections and tables and provide for easier readability and visual aids

The CFPB's anticipates that these agreements would be posted on a credit card issuer's website to allow for interactive reading by users. Users could click on any portion of the agreement to receive additional consumer information about particular sections such as disputes, charges, or interest rates. Users could also click on the separate definitions section if they wished to read the contract definition of any particular term. Of course, the agreement would also be available in printed form for users without internet access.

The CFPB is interested in knowing what you think about this new form. Click here to view it, interact with it, and comment on it directly to the CFPB.

Other Information:

The CFPB is a powerful new watchdog agency created by the Dodd-Frank Act, and tasked with regulating the offering and provision of consumer financial products or services under the Federal consumer financial laws. The CFPB is designed to have the duties and authority to regulate and enforce a variety of financial consumer protection laws, including:

Independent examination and enforcement of financial consumer protection lawsConsolidated enforcement of a variety of consumer protection laws previously enforced by other agenciesCooperation and communication with other financial regulatory agencies to enhance consumer protection and rule enforcement

For more information on the CFPB or other regulatory agencies affected by the Dodd-Frank Act, click here or visit http://doddfranksummary.com/.

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Master Service Agreement

Sometimes contracting parties decide that they want to enter into a long term arrangement where the vendor will provide the customer with services supporting a wide range of projects over a long period of time. The customer may not be in a position to predict each and every project that might come up, but is reasonably sure that the services will be often needed. As a result, it might make a lot of sense for the parties to enter into a master service agreement.

What exactly is a master service agreement? Well, this kind of contract sets forth all of the general mechanics of how the parties plan on doing business with each other, as well as the general legal provisions, but doesn't say anything about the exact services, deadlines, and fees in any given instance. The parties instead execute a smaller contract that operates underneath the overall master service agreement and contains these kinds of provisions. This smaller contract is called a "statement of work" and gives the parties the flexibility to quickly enter into a deal for a new matter without needing to negotiate the overall mechanics and legal terms.

In the master service agreement, the parties usually cover the following issues:

Confidentiality. This section typically requires the vendor to keep all information, data and materials of the customer discovered during the performance of the services to keep that information confidential, regardless of whether or not it is marked as such, and to not share it with third parties. The requirement usually mandates that if a court demands that the vendor reveal the confidential information, the vendor will tell the customer first and give the customer a chance to obtain a protective order from the court. The requirement does not normally apply to information that is already in the public domain, is rightfully received from a third party, or is developed independently without reference to the customer's confidential information.

Invoicing. The master service agreement usually makes clear when the customer's payment obligation starts. Normally the seller wants the obligation to begin upon the date indicated in an invoice, while the customer wants the obligation to not materialize until after it actually receives the invoice.

Payment Terms. Parties negotiate over payment terms all the time. The length of time the customer can exhaust before making a timely payment usually depends on how much bargaining power one party or the other possesses. A critical customer for a vendor who can easily jump to a competitor might press for very long payment terms. Some customers even insist on not having to pay an invoice until 6 months have elapsed. Powerful vendors compress the payment terms time frame, sometimes demanding that the customer must immediately pay as of the date of the invoice.

Term. The master service agreement usually indicates a term during which the parties can execute statements of work. One common error the parties make is to sign a master service agreement and then forget about it, only focusing on the statements of work. As a result, it's easy to let the master service agreement expire, and continue to execute statements of work under that expired agreement, which puts the parties in a murky situation where it's unclear whether or not the master service agreement still applies.

Limitation of Liability. Vendors often insist on a limitation of liability provision, which restricts the ability of the customer to obtain huge damages amounts from the vendor if it wins a judgment in litigation. Understandably, customers push back on including this sort of a provision.

Indemnification. Customers typically want to be protected from third party lawsuits caused by the vendor's goods or services. For instance, a software customer might be afraid that the vendor stole some of its source code from a competitor. Once the customer starts using that software, the last thing the customer would want would be a lawsuit for copyright infringement. As a result, the customer might insist on including an indemnification clause in the contract, which would normally require the vendor to step in and defend this kind of lawsuit, as well as pay any settlement amounts or damages. This would normally also require the vendor to pay the cost of any lawyer fees.

By understanding the confidentiality, invoicing, payment terms, term, limitation of liability and indemnification issues, hopefully you can craft an outstanding master service agreement that will meet your needs.

Jason Mark Anderman is President of WhichDraft.com, where a Q and A wizard allows users to create, collaborate, and customize legal documents simply and easily.

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Agreement Of Sale

When you draft an agreement of sale, you want to make absolutely sure that you figure out the payment schedule, delivery schedule and customer obligations that need to be fulfilled first before you can successfully complete the sale. Tackling these issues is a key ingredient in properly setting your customer's expectations so you can avoid later disappointments, buyer's remorse, or hassles over budget and timing matters.

Payment Schedule. It's vital to make sure that the timing of all payments is completely agreed to by both you and your customer and set forth in the agreement. There are many questions you want to ask and converse with your customer about, such as, how long does the customer have to pay you after being invoiced? Typically, payment terms vary between 10, 30, 60 and 90 days. What triggers this time frame, the date of the invoice or the date the customer actually receives the invoice? Sellers prefer that the date of the invoice is the trigger, because they know that date will be the time when they send out the invoice, and don't necessarily know when exactly the customer will receive it.

Also, if the customer never receives the invoice, the seller quite rightly still feels that payment should be promptly made without having to wait even longer after resending the bill. For ongoing arrangements, such as supply deals, vendors usually want to make sure that they are paid regularly to reimburse them for the burden of always maintaining sufficient productive and inventory capacity to fulfill customer demands from time to time. To do so, the seller might insist on a monthly minimum payment. Is that amount to be paid on the first, or the last date of the month? Does this minimum fee need to be invoiced, or is it simply the customer's responsibility to send it in on a timely basis? These are issues that the parties need to sort through and specifically agree on in the agreement of sale.

Delivery Schedule. This provision is usually left unclear, which sets up a situation where the customer can feel hurt and disappointed with the level of service provided by the seller. As a result, smart vendors try to specify as much as possible when all goods and services sold will be delivered, installed, configured and fully available in a production environment for the customer's use. Sometimes customers will tie the payment terms to the delivery schedule, holding back a certain percentage of the overall fee until the seller completes various milestones.

For instance, an equipment buyer might insist on paying only 25% of the fee upon signing the contract, 25% more upon delivery, an additional 25% once the vendor fully installs the equipment, and the final 25% after the vendor configures the equipment and it passes the buyer's acceptance test. Alternatively, the payments could be simply divided up by days, particularly if the customer and the seller feel that they have a good enough business understanding of the situation and execution capability to trust each other to make payments regardless of milestone achievements. In this arrangement, the customer might pay 10% upon contract signing, 20% more 30 days later, and additional 30% 15 days after the second payment, and the final 40% 15 days after the third payment. That way the seller receives the entire fee within 60 days.

Assumptions-Customer Obligations. Many times the vendor simply can't fulfill the sale because the customer blocks the vendor from doing so. Typically, this occurs when the customer has to provide key information, resources or access to facilities as a necessary condition preceding the vendor taking a particular action. A good example would be an equipment installation, where certain electricity, cabling, temperature, clearance and width requirements must be met at the customer's facilities or the equipment cannot be installed properly.

Another example would be when a software vendor designs a custom application for a customer's finance needs, but the customer never signs off on a final specification describing exactly what the software will and will not do. As a result, vendors must make absolutely clear in their contracts what conditions customers need to meet first before the vendor will fulfill the terms of the deal. Without this kind of provision, a seller can be left on quite shaky ground, subject to the whims of a demanding and unreasonable customer who is making life quite difficult when attempting to provide the goods or services desired.

Fortunately, you can now navigate around these common obstacles and prevent payment schedules, delivery schedules and customer obligation assumptions from derailing your future success by properly dealing with these issues in your agreement of sale.

Jason Mark Anderman is President of WhichDraft.com, where a Q and A wizard allows users to create, collaborate, and customize legal documents simply and easily.

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Service Agreement: What Can I Use It For?

A service agreement can be used to both engage a contractor or, if you are a contractor, you can use this agreement to be engaged to do work for a business or individual.

A service agreement may be used for a single job, a recurring job or the continual provision of a service. The type of service that is provided for in the contract is limitless. You can use a service agreement to engage contractors to do a range of services for you from cleaning, gardening, IT computer support, office assistance to providing services temporarily for your business at busy times such as end of year audit, filing and preparation of your financial reports or if an employee is absent on for a long period and needs to be temporarily replaced.

A service agreement should contain an understanding between the parties of the expectation of the services, level of service, outcomes and milestones related to the service to be provided. In addition, there should be a clear understanding of the relationship between contractor and person engaging the service. It is important that this relationship is not considered to be one of employment but rather remain that of a contractor or service provider and having a service agreement in place will ensure that this is clear. Otherwise, there are numerous legal requirements that are triggered including superannuation and holiday pay requirements.

It is also important to ensure you have an agreement in place for things such as ensuring your contractor or service provider is under a duty of confidentiality to keep things private such as client lists, your financial affairs and your business processes which may be secret. In addition, you should ensure that you own any work you engage them to do, for example, if you have engaged someone to do artwork, advertising, software development or marketing of a product or website for you, you need to ensure through your service agreement, that you obtain ownership in the intellectual property in this work after they complete it.

Using a service agreement ensures you and your business are protected and is a professional method to hire a service provider to assist you. In the event you have an issue and do not want to continue the relationship or work with the service provider, by having a service agreement in place it ensures you have an agreed method for termination and any dispute that may arise as a result. In addition, the use of such an agreement minimizes misunderstandings and clarifies both your relationship and expectations. This will ensure a better working relationship as well as minimizing any business or service risk.

Want to know more? Click here for Free information on Service Agreement. Australian legal agreements and forms from http://www.legal123.com.au/.

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Importance of a Quality Franchise Agreement

The Indian franchising industry has seen robust growth over the past decade. In spite of the economic recession, the annual growth rate of the franchising industry in India has remained positive and is currently pegged at 30%-35%. The success of the franchising story in India is a testament to the huge potential and promise that India holds for the franchising industry.

In India, franchising has gained considerable popularity in numerous sectors, such as, education and training, healthcare and wellness, information technology services, and in particular, the retail sector including, food and beverage, fashion and lifestyle, etc. However, franchising of products and services in India is still in its infancy thus presenting to interested foreign enterprises a vast untapped business opportunity.

A fast growing middle class population with a faster growing disposable income and propensity to spend is one of the paramount reasons for the mushrooming of the franchise industry in India. Additionally, the entrepreneurial character of India's population and increased brand and quality awareness amongst urban consumers provides another impetus to franchising in India.

Apart from a huge consumer base, next only to that of China, exposure to international standards of goods and services and availability of skilled, technology savvy and relatively cheaper human resources, India has one of the fastest growing retail sectors. As per Business Monitor International's India Retail Report for the third quarter of the financial year 2010, retail sales are expected to grow from $353 billion in 2010 to $543 billion in 2014. Clubbed together, these factors present a highly lucrative business opportunity for foreign enterprises wishing to franchise their business, brands, or their products.

Franchising is a relatively modern distribution channel that permits foreign brand owners to exercise a substantial degree of control over the manner and mode in which their products or services are offered and sold to consumers. It ensures efficient and rapid trans-border market penetration to the Franchiser, an opportunity to take its brand beyond boundaries with minimum capital investment and risks.

Simply put, a franchise is a business model premised on a license granted by one entity (the 'Franchiser') to another (the 'franchisee') permitting use/exploitation of the Franchiser's intangible assets such as brand/trade name, business model and concept, image, marketing techniques and other intellectual property for the purpose of making sales or providing services in a defined geographic location in return for a sum of money.

India does not have a consolidated legislation regulating franchising, although private sector bodies have been lobbying for enactment of franchise specific legislation. Some key laws which impact franchising in India include the Indian Contract Act, 1872, the Competition Act, 2002, the Trademarks Act, 1999, the Copyright Act, 1957, the Patents Act, 1970, the Consumer Protection Act, 1986, the Foreign Exchange Management Act, 2000, labour and taxation laws.

Importance of a Quality Franchise Agreement

'Quality' in any agreement, regardless of its subject matter, is, inter alia, seminal for mitigation or avoidance of disputes between contracting parties. 'Quality' of an agreement may be assessed on numerous parameters including: clarity in purpose, holistic/loophole free character; unambiguous provisions/terms/conditions with no scope for contradiction; manner of presentation; and most important enforceability.

A 'franchise agreement' is a contract between the Franchiser and the franchisee which defines their relationship and inter se rights and obligations.

'Quality' assumes even more significance in a franchise arrangement due to the inherent commercial and operational complexities present in such arrangements. A quality franchise agreement must effectuate the underlying symbiotic relationship between the Franchiser and the franchisee.

A quality franchise agreement must ensure clear, unambiguous and water tight coverage of all critical issues, such as, roles and obligations of the parties, confidentiality and intellectual property protection; payment terms and taxes; duration, renewal and termination; agency issues; post termination issues; negative covenants; governing law and jurisdiction (especially in international franchise arrangements).

A good franchising agreement should in addition ensure that quality control mechanisms do not flout India's competition laws. For instance, in certain situations a provision obliging a franchisee to source products exclusively from the Franchiser or any other specified entity may be regarded as anti-competitive and in contravention of the provisions of the Competition Act, 2002.

Naturally, the importance of a quality franchise agreement for a Franchiser and a franchisee differs considerably as discussed below.

The Franchiser's Perspective:

The importance of a quality franchise agreement for a Franchiser cannot be stressed enough. Of paramount importance for the Franchiser is protection of its brand, image, reputation, know-how, business concept and other intellectual property rights as well as limiting exposure to potential risks and liabilities resulting from the franchisee's conduct.

It is important that the franchise agreement is carefully drafted to ensure clarity on duties and services of the franchisee including in the areas of investment and infrastructure, adherence to specific operating guidelines to maintain uniformity, reporting requirements, quality maintenance; annual market penetration targets; financial returns such as royalty and fee payment, etc.

A quality franchise agreement should provide adequate fetters and security against misuse of the Franchiser's intellectual property rights by the franchisee. Further, it must provide enough quality control mechanisms to the Franchiser, including control over managerial discretion of the franchisee, to enable it to control its business concept and protect its brand and reputation. Consequently, the franchise agreement must unambiguously and comprehensively address vital issues, such as, the temporal and territorial scope of the license, the rights and property licensed, nature of the license, restriction on use of licensed rights and property, quality control measures, including periodic audits to ensure that the business concept is adhered to, sourcing of products, training, type of products to be sold under the franchise, etc. The business concept being licensed and mode and manner of operation must be clearly stipulated to enable the franchisee to conform to it. However, the downside of excessive control over a franchisee and franchised products is that the Franchiser may become susceptible to liability for acts of the franchisee in claims by third parties. A quality franchise agreement should ensure that the relationship is on principal to principal basis and the Franchiser is not liable for the franchisee's acts and omissions.

Another crucial issue for the Franchiser is protection from competition by its franchisee. It is common practice to include non-compete covenants during and post termination in most franchise agreements. However, a quality franchise agreement, like any other agreement, must have a carefully crafted non-compete clause to ensure that it is enforceable under law and not a redundant term. Unreasonable post termination non-compete clauses which are against public policy and in restraint of trade would be enforceable.

A quality franchise agreement should ensure that the franchisee conforms to the business concept. It must have stringent provisions to deal with situations of breach and non-adherence to the business format and misuse of brand by the franchisee. Also, the franchise agreement must protect the revenue flow from the franchisee to the Franchiser.

Issues related to governing law and jurisdiction, post termination obligations to ensure protection against breach of confidentiality and intellectual property, inventory handling are equally critical and need to be adequately addressed in a franchise agreement to ensure effective control and systematic business expansion.

The Franchisee's Perspective:

'Quality' is as serious an issue for the franchisee as it is for the Franchiser. As the initial investment in the venture is that of the franchisee, a quality franchise agreement is essential for a franchisee to capitalize on its investment.

For a franchisee, a quality franchise agreement must have clearly defined payment terms with no hidden fees or costs and a clearly defined area of operation. It must protect the franchisee from infringement of third party's intellectual property rights due to use of Franchisers intellectual property by the franchisee. Further, the franchise agreement must enable the franchisee to optimally leverage the brand and other intellectual property rights licensed by the Franchiser and ensure continuity of supply (wherever applicable). Therefore, a clearly and properly defined business concept and format is as important for the franchisee as it is for the Franchiser. It helps the franchisee avoid implementation issues and ensure profitability of the venture. A quality franchise agreement should enable the franchisee to extract maximum support for implementation of the business concept from the Franchiser by way of training, up-gradation of concepts and evolving technologies, etc. The relationship between the Franchiser and the franchisee should be that of independent parties and the agreement must be carefully drafted to avoid an inference of agency.

Thus, a quality franchise agreement is the very fulcrum upon which the success of a franchise rests which by itself underscores the importance of 'quality' in franchise agreements.

Seema Jhingan

Areas of Practice:

Infrastructure, Telecommunications, Private Equity and Venture Capital, Mergers/Acquisition, Education, Software/Information Technology, Business Process Outsourcing, Media & Entertainment, General Corporate and Commercial, International Arbitration.

Professional Summary:

Seema Jhingan's practice spans over seventeen years during which she has acquired substantial expertise in representing developers, sponsors/lenders, venture capital investors, international corporations, financial institutions, and other strategic investors involved in the establishment, development and financing of major infrastructure, IT and education projects in India.

Seema is a Partner with a Delhi Based Law Firm LexCounsel Law Offices and regularly contributes to journals and publications and often takes up speaking engagements.

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Confidentiality Agreement: What Can I Use a Confidentiality Agreement For?

A confidentiality agreement can be used to protect sensitive information which is being disclosed to other people. They are also known as Non Disclosure Agreements.

A confidentiality agreement can cover and protect a wide range of information: verbal, written, pictures, ideas, designs and is not limited to discussions. Confidentiality may need to be considered in employment situations to protect trade secrets or other sensitive information that an organisation would not want disseminated to the public or when a third party is dealing with client information. Another common use for such agreements is when a person or a company has a new idea they want to discuss with others in order to employ contractors to develop the idea, but want it to remain confidential. This also may occur during discussions with prospective investors, joint venture partners or financiers.

You would, in the above examples, need to ensure your idea and information was not used, copied or let out into the public domain either in whole or in part, in any form or manner. Not only are new ideas communicated in this type of situation, but so are trade secrets and designs, making a confidentiality agreement in these types of dealings and discussions essential.

A confidentiality agreement does not necessarily compensate you if your idea or design is leaked into the public domain but if a person or company signs such an agreement, you at least have recourse if any information is then divulged and by signing the agreement, it re-enforces the importance of the information that is being received and may dissuade any potential breach. If information is used or made public, for example, the person responsible will be liable for the consequences and all losses that may flow from any breach but in many cases, the compensation may not equivalent to the loss of the idea or information. You need to ensure that your agreement is strong and makes clear the "potential" losses that may be suffered so that you may be compensated adequately.

The nature of the information and any work being done will determine the appropriate terms for each confidentiality agreement; in many cases the information will be kept confidential indefinitely and confidentiality agreements involving employment last beyond the term of the employment.

Irrespective of your circumstances and how important your information may be, it is likely at some stage in your everyday life that you will need some form of confidentiality agreement or arrangement. This is a simple and cost effective method of managing and protecting yourself and your information.

Want to know more? Click here for Free information on Confidentiality Agreement. Australian legal agreements and forms from http://www.legal123.com.au/.

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Confidentiality Agreement Template

Think of the last time you thought about entering into business with someone. Whether you were engaging a consultant, hiring an employee, sharing your trade secrets with a vendor or providing your private data to a customer, you've probably asked the other side to sign a confidentiality agreement protecting your most prized information (or they've asked you to do so).

But this kind of contract shouldn't be some simple hoop to jump through, farmed out to your lawyers or contract managers without you paying close attention to the details. These are binding obligations that you can be sued for if you don't follow them, so it's important to take them seriously. And if you work at a small business, you likely don't even have the time or money for an attorney to handle the constant flow of nondisclosure agreements that often comes your way.

So it's not a bad idea to try and get a sense of what the key provisions are in a comprehensive confidentiality agreement template. After all, most of these provisions are more business oriented than legalistic, so shouldn't you make the business call on what positions you want to take in your confidentiality contracts?

Here are the key provisions and negotiating positions that you want to think about:

1. Business Purpose. Generally, you state at the top of a confidentiality agreement why you are sharing your confidential information. This is the business purpose. It could be because you and the other party are considering a business relationship, or to evaluate a potential product or service. Whatever it is, you want to clearly state this business purpose up front so it's clear what the agreement is focusing on and why the parties are signing it.

2. Marking Requirement. This is definitely something to watch out for because it can get you into trouble quite easily. The marking requirement forces the party disclosing its confidential information to actually mark or stamp that information as confidential or describe it as such in a letter given to the receiving party. Unless you are in the habit of keeping close track of your confidential materials and stamping them with big bold letters, you're probably going to fail to comply with a marking requirement and unknowingly give away your confidential information without any restriction on the receiving party from sharing it with the public or third parties. How do people try and alleviate this concern?

3. Description of Confidential Information. Well, one way people try and get around the marking requirement is to provide a description of which information is confidential, and which information is not. But people usually write such a wide ranging description that it's hard to know what is or is not confidential. And if two parties sign multiple confidentiality agreements with each other, then you usually end up with multiple overlapping definitions of confidentiality, so you have no idea which agreement applies to which information, nor whether certain materials fall under the agreement and other ones do not.

4. Exceptions. What's the solution? The best move is to just say that all of the private information that you provide for the business purpose is confidential. Then insert some wide ranging exceptions to this definition of confidential information that make the agreement a fair one. Typically, you would tell the party that is going to receive your confidential data that they don't have to protect any of your materials if they happen to be already out there in the public domain, are previously in the receiving party's possession (which means they developed the same thing on their own), or were given to the receiving party by a third party. These kinds of exceptions are important because it's not fair to require the receiving party to lock up your materials if they really aren't confidential to you. At the same time, anything that doesn't fall within one of these exceptions really should be kept confidential because no one else is in possession of it. Ultimately, these exceptions provide a nice balance between the parties and make it easier to determine what is covered by the nondisclosure obligation and what is not.

So if you are thinking about all of the provisions that should typically go into a comprehensive confidentiality agreement template, make sure you nail the business purpose, marking requirement, description and exceptions issues. These are the provisions that are most heavily discussed and negotiated in this kind of contract, so business people should be knowledgeable about them and able to take a firm stand on each issue.

Jason Mark Anderman is President of WhichDraft.com, where a Q&A wizard allows users to create, collaborate, and customize a confidentiality agreement template simply and easily.

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