News & Thought Leadership from Sulloway & Hollis

August 21, 2017

Business Agreements

The nature of your business will, to a great degree, govern the types of contracts and business documents your company should have.

License Agreement

If your company sells or licenses software or related software services, a license agreement is needed to fully protect your company as the licensor. If your company sells or licenses directly to the end user through the company’s web site, then terms of use and privacy terms are also needed. Special attention should be paid to making sure that your company controls both jurisdiction (which state’s laws will be applied) and venue (where the law suit is filed) for any dispute that may arise to ensure that you can litigate in a location convenient to your company. You and your counsel may also want to consider whether to elect arbitration as the method of resolving disputes or to rely on the courts in the chosen venue.

In addition, your license agreement or the terms of use will deal with limitation of liability, warranty obligations and limitations, patent indemnification, and ownership of the software regardless of the method of sale or license. It is crucial to work with experienced counsel in drafting the license or terms of use to make sure that you are fully protected.

If your company sells products or provides services it is a good practice to develop a series of form documents which would include a quotation form, a standard set of terms and conditions of sale and a standard set of terms and conditions for all purchases.

Quotation form- This form should be used to quote prospective customers. At a minimum the form should include pricing and make clear how long the offered prices will be honored, the delivery terms (stated in terms of after receipt of order), the standard warranty terms and limitation of liability. Many companies may also wish to include payment terms (including discount terms, if any) and other shipping information. The primary goal with this form and the following forms is to limit your company’s exposure to unlimited liability.

Standard Terms and Conditions of Sale- This form would be used upon the receipt of any order as an acknowledgement of the order. In addition to defined terms, this form may include inspection criteria and quality systems used, patent indemnification and insurance requirements.

Standard Terms and Conditions of Purchase- This form would be used for the acquisition of goods and services. The primary goal is to preserve your company’s rights to compel performance on the part of the supplier. Your company may wish to impose additional requirements upon the supplier in the areas of quality requirements and systems. Also, your company must preserve the right to impose contract terms on the supplier that your company is required to “flow-down.”

Non-disclosure Agreements- These agreements are used by almost every company at some time and may take many forms. The company should have a non-disclosure agreement for all visitors to sign before entry into the company facilities (a one page document at reception may be sufficient). All suppliers should be required to execute a non-disclosure agreement before being given confidential information, such as drawings or specifications that may be used to quote pricing for products supplied to your company. Prospective customers who wish to review your company’s drawings and/or specifications should be required to sign one. Potential business partners or acquirers should be required to sign before any financial information is disclosed. Each form will have some common language, but each document is unique and should be tailored to fit the transaction.

These are important and often complex documents. It is crucial that you and your managers develop a relationship with an attorney who will explain all the options and work with you and your managers to develop agreements tailor made for your situation.

The attorneys at Sulloway & Hollis, P.L.L.C. have the training and experience to handle a wide range of issues affecting business start ups, transactions and operations.