An Exclusive Business Cooperation Agreement allows companies to come together towards working as one organization instead of acting as separate Business entities competing against each other in a market. It may also be termed as “Partnership Agreementt” or Memorandum of Understanding(MoU) since mutual understanding is reached between a Vendor and their Partners, where both of them are investing in the same product for a specific market without worrying about competition between the two.
The agreement contains a set of defined terms and conditions which govern the way of functioning of a partnership business. The terms and conditions draft includes some of the key details such as Service providing methodology, Confidentiality clause, Type of business, Registered name and address of the business, Length of partnership, etc.
When Do You Need an Exclusive Business Cooperation Agreement?
A business relationship between two companies cannot survive without a clear understanding of “how things will proceed?”. Without a properly defined code-of-conduct, Business Cooperation is no cooperation at all. As soon as both the participating parties decided to work together with full transparency and shared expectations, the need for having an Exclusive Business Cooperation Agreement becomes imperative.
Before entering into an agreement, it is extremely important to know beforehand the possibilities of chaos and disputes due to various unaddressed issues, so that in case of an emergency the stakeholders are ready with an effective crisis response.
Thus the main purpose of a Business Cooperation Agreement is to cement the foundations of cooperation between the two organizations by building trust and confidence among the business partners who agree to mutually abide by the rules and guidelines laid down in the contract.
Inclusions in an Exclusive Business Cooperation Agreement
The Participating parties involved in an Exclusive Business Cooperation Agreement are the Vendors and their sales partners along with their Attorneys. The Exclusivity of the Agreement is strictly restricted between at least two companies with a definite confidentiality clause that prevents the sharing of services to partners outside the agreement. However, new partners can be admitted into partnership by editing the clause through mutual consent.
A partnership can be started off with a simple handshake while a formal agreement comes into immediate effect as soon as the draft is signed by both parties.
How to Draft an Exclusive Business Cooperation Agreement?
An agreement written poorly is worse than having no agreement at all. A partnership agreement is a basic foundation for any business relationship. It contains all the necessary legalities and is used as evidence in legal disputes. Therefore, the draft of such an agreement should always be:
- Precise with a clear understanding of things,
- Communicative of each other’s goals/expectations,
- and most importantly, the language of the draft must be completely addressing all issues.
Procedure for drafting an Exclusive Business Cooperation Agreement:
- Firstly, Apply for the registration of your business partnership firm at the Registrar of Firms. This can be done online.
- The duly signed copy of the partnership agreement containing all the terms and conditions must be provided to the Registrar of Firms.
- Deposit all the necessary fees and stamp duties.
- The Registrar approves and issues a certificate of incorporation of your business partnership firm.
Thus, your firm attains legal recognition.
Hiring an Attorney or the aid of a legal service who is an expert on the Exclusive Business Cooperation Agreement is always the best bet for drafting your agreement.
Benefits of Exclusive Business Cooperation Agreement
Some of the benefits of an Exclusive Business Cooperation Agreement are:
- Limiting the risk of disputes between the participating parties.
- More capital from the number of parties involved.
- Access to the shared resources of Technology, Human resources etc.
- Defined expectations and goals.
- Low start-up costs.
- Less competition in a specific market.
- Transparency between cooperating businesses.
- Set guidelines for the smooth functioning of partnership.
- Effective crisis response.
Apart from great benefits, some disadvantages can be:
- Parties have unlimited liability.
- Parties are jointly responsible for other parties’ actions and debts.
- Profits are to be shared.
- The risk of disagreement or withdrawal from business always looms over.
- Disputes have a direct impact on the asset value of the business.
- You can’t have an edge over your competitor whom you are cooperating with.
Types of Exclusive Business Cooperation Agreement
There are four different types of Partnership agreements namely:
- General partnership Agreement: In this, all the partners are equally responsible for the actions of one partner. The liabilities of the business are shared by all the general partners in business.
- Limited partnership Agreement: A limited partner is the one whose liabilities are limited and does not participate in the day-to-management of the business. This agreement is mainly for investors who only invest and receive a profit share.
- Considering Liability partnership Agreement: Here, the liability of a business partner is limited only to his investments in the business.
- Limited Liability Partnership Agreement: In this, all the partners are personally liable for their actions and debts. All the other partners are not responsible for someone’s wrongdoings.
Key Clauses of the Exclusive Business Cooperation Agreement
Some of key clauses and terms of the Exclusive Business Cooperation Agreement are:
- Agreement on Partner’s Contribution and authority in the Project.
- Agreement on Partner’s Profit and losses share percentage.
- Agreement on Partner’s Duties and Rights
- Agreement on Partner’s Death or Disability
- Agreement on Partner’s Intellectual property rights
- Agreement on handling the sales
- Agreement on the handling of disputes
- Agreement on Dissolution of contract
What Happens in Case of Violation?
The breach of a Business partnership agreement will certainly lead to penalties. But apart from paying hefty fines, there are few consequences that may fall upon a business partner. Some of them can be:
- You might not be able to use your business’ money.
- Your staffing and decision making authority may be hampered.
- You may not be able to invest capital without the consent of your partner.
- The business may meet its disastrous end.
Sample Exclusive Business Cooperation Agreement
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