Many clients have been asking us to explain the different options available to them when they want to work with someone on a project. The clients often use the terms “partner” or “partnership” to describe the relationship they intend to have with the person they’re working with. The clients’ understanding of “partnership,” we find, is almost always different from the legal definition of a partnership, meaning that the clients don’t actually want a partnership in the legal sense. We, therefore, point them to the available options.
- Teaming Agreement
- Reseller Agreement
- Joint Venture Agreement
- Subcontractor Agreement
- Collaboration Agreement
The options we’re discussing all have one thing in common – cooperation between parties to deliver on a project. There are, however, important distinctions that you need to be aware of.
A Teaming Agreement is an agreement you can typically use when you’re still in the bidding phase and want to contract with someone to help you submit the bid. In this scenario, you’re usually the lead not only in submitting the bid (and responding to the RFP or RFQ), but also in the event that the customer awards you the project. The Teaming Agreement then stipulates that you’ll become a prime contractor, and will subcontract a portion of the project to the other party if you win the project.
You can use a Reseller Agreement to appoint someone as your distributor or your agent. The following is the simplest way of understanding this type of relationship:
- You provide goods or services in one territory, but wish to expand, perhaps, to other territories; and
- You, then, get a person in that territory who’ll either sell on your behalf, and facilitate a direct relationship with your customers, or buy from you and resell the goods in their name.
Joint Venture Agreement
When you conclude a Joint Venture Agreement you probably want it to cover one of two scenarios.
- You decide that you’d like to jointly venture with another person on a long-term basis. You establish a new company or use an existing one, with the MOI and a Shareholders Agreement regulating the relationship – a Joint Venture entity, essentially.
- You jointly venture with another person using an agreement that sets out the relationship of the parties, but you don’t establish a company or use an existing one – a joint partnership, essentially.
We don’t recommend the second option.
A Subcontractor Agreement is the agreement you can use if you’ve been appointed as the prime contractor on a project and you want to subcontract a portion of the project to someone else. In other words, you won’t be providing all the goods or services on a project yourself and, therefore, contract with someone else for them to deliver the rest of the project to your customer.
Where you want to collaborate with someone to build and deliver something together, for example, this type of agreement might be more suitable. It allows you to collaborate together for a set period, while clearly defining what each party’s rights and responsibilities are.
What if you’re not the lead on a project?
Where a person who’s a lead on a project appoints you as their subcontractor, we believe there are basically two ways of approaching it.
- You can treat them as a customer of yours, because you’re providing them goods or services in exchange for payment (even the goods or services you provide them are ultimately going to their customer); or
- You can use one of the options we discussed above.