In our last RealDealDocs blog entry, we discussed purchase and sale agreements, outsourcing agreements and triple net lease agreements. This week, we will cover three other types of agreements: distribution agreements, construction agreement, and consulting agreements.
To review, an agreement can be defined as “a negotiated and usually legally enforceable understanding between two or more legally competent parties. Although a binding contract can (and often does) result from an agreement, an agreement typically documents the give-and-take of a negotiated settlement and a contract specifies the minimum acceptable standard of performance.”
Distribution Agreements
Distribution agreements are contracts between the manufacturer of the product and a distributor who sells and/or distributes the product. A manufacturer may have several distribution agreements in place at a time throughout different regions. The agreements can include the price that the distributor pays for each item, how many items will be available to the distributor, and the marketing of a product.
A distributor may request exclusive distribution rights within a specific geographical location, however if the goods are in high demand this may not be feasible. Defining exclusivity is essential to any distribution agreement and not including it could result in expensive legal battles. If an exclusivity agreement within region is desired, a manufacturer should determine whether the distributor is equipped to handle the distribution area.
Multiple distributors in an area can affect the price distributors can charge as well as the volumes of merchandise they turnover. Manufacturers enter into distribution agreements when they have a stock of goods and need a store or an individual to sell or distribute the merchandise because they are not in the business of selling goods.
Both parties must realize a benefit from the agreement in order for the relationship to survive long term. Biased or one-sided terms may end the relationship prematurely.
Construction Agreements
A construction agreement is made between a builder and the property owner. This type of agreement is executed so that both parties are clear on their duties and the compensation. A construction agreement should be executed whenever a homeowner or business owner is remodeling, roofing or especially building a house or business. Even the smallest construction jobs should be defined by a contractual agreement as construction disputes are a highly litigated area of the law. Construction agreements must contain basic contract terms such as parties involved, date, duties and compensation. They should also contain simple specifics such as who is buying the materials; and more complex issues like permits and building regulations.
One of the most important terms is time. Failing to include the words “time is of the essence” allows contractors to work at their own pace. This can cost a home or business owner money in hourly rates of workers and unparalleled frustration.
Consulting Service Agreements
Consulting service agreements are contracts set forth between two parties that outline the work to be performed and the compensation given for the work. Other terms often included in a consulting service agreement are method of payment, time to complete the assignment and procedures that govern breaches or disputes.
Since a contract represents mutually agreed upon terms, special attention should be paid to understanding what has been memorialized. Terms that are specific to the type of consulting can also be added such as ownership of work products, standard of care, and requirements of the skill level of any other individual working on the task.
Businesses contract with consulting firms as well as individuals. Consultants are hired for their expertise in specific areas. A consulting service agreement is used by businesses that do not specialize in that area and need an expert to assist in making suggestions for changes. A consultant does not have the authority to make changes, only to give advice. Consultants may be contracted for medical, legal, human resources, engineering, internet or any field that the business may need help with.
Drafting an agreement from scratch can be a time consuming and daunting task – plus, without input from a qualified attorney, you may be poised to enter into an arrangement this not legally sound or in your best interest. Fortunately, RealDealDocs allows you access to thousands of agreements that have already been used in a myriad of different industries.