The pitfalls of partnerships
At some point, all companies will need to go into a partnership with another company, be it for production, distribution or something else. No company is an island, to use an old cliché. And in doing so, you are going to need a contract. Yes, you are.
“Two questions that we hear a lot is ‘why do we even need a written contract?’ and ‘can’t we just do a one-pager for this?’,” Peter Neve, lawyer at Lett with an expertise in contract negotiations, “and the answer to that is that you are going to need one for when things go wrong. Because when they do, you will have all your agreements in writing.”
And in that contract, there are a few important clauses to consider. Peter showed us a long list of potential pitfalls and elaborated on a few:
- Scope and extent. It is important to make clear agreements of who does what and how much they do of it.
- Price and payment, because, you know, money is good.
- IP rights. Who has the copyrights, rights for the trademarks and so on? What are you delivering to the contract - and what is your partner delivering? It is important to agree on this in case someone “borrows” your stuff.
- Contractual terms and termination. What do you do, in case one of you want to get out of the contract?
- Choice of law and venue. Which country’s law applies, in case there is a legal dispute? When dealing with foreign partners, it is not unlikely to agree on a neutral country’s law. If you make the suggestion, suggest somewhere that resembles your own country’s law.
Following Peter’s talk, he took some questions from the audience. Here are two of them:
Who own ideas that come up in meetings, if nothing is in writing?
If it comes up in a meeting, you would have to be able to prove that it was yours to make it a dispute. An idea in one meeting is probably not enough for co-ownership.
How do you handle costumers or partners that don’t pay?
Get some security for your payment, a bank guarantee or deposit. But if you don’t have that, and they don’t pay, then there’s no other way than go to court. And that generally takes a year.