What is a Teaming Agreement?
A Teaming agreement is an agreement between a certain number of parties, more than two, who agree to work on a project (usually tenders) together, by using each other’s resources. In simpler terms, as the word says, Teaming Agreements are agreements wherein the parties to the agreement ‘team up’ for a project.
A teaming agreement is essentially an agreement between two parties who combine their resources, capital, skillset etc. in furtherance and completion of a particular common objective. The parties can further be divided into two types, Primary party, the one who is primarily responsible for the completion of the project and the one who approaches the other party, and Subordinate party, who is approached by the Primary party, to help the primary party complete certain tasks and provide him with certain resources required for the completion of the project, which the primary party lacks. A subordinate party can also be called as a Sub-contractor.
Issues that may arise while entering into a teaming agreement
While entering into the Teaming Agreement, it is very necessary for the parties to the agreement to take full notice of several issues, that may arise while entering into the drafting agreement. Due diligence is necessary while entering into such contract by both the parties, especially by the subcontractor party. so as to ensure that the primary party doesn’t abuse their higher position.
There may be times where the two parties, while intending to achieve the same object together, may not agree on certain terms, rights and obligations. Since, many a times there may be a scope that there can be issues about enforceability of the agreement, which is technically the validity of the agreement in the eyes of the law. It is crucial to make sure that the crucial duties in the Teaming Agreement are written and drafted so that the court of law can enforce them. A lawyer, or a legal expert drafting a teaming agreement must ensure that the Terms and conditions in the teaming agreement are drafted in such a way that improve the chances of enforcement in the eyes of law, as teaming agreements are vulnerable to enforceability issues.
The parties may want to take the following steps to make sure that the obligations contained in the teaming agreement are enforceable:
1) Agree on the type of agreement of the type of agreement they might want to sign.
2) Duration of the work
3) Scope of the work
4) Necessary requirements on every party for the completion of the work
Teaming agreements are crucial and necessary for the parties when they are submitting bids for a common project. There are a number of benefits and drawbacks of teaming agreements, and in order to improve the agreement for more, it is necessary that the agreement must be carefully be structured so as to prove enforceability in the court of law, so as to ensure that in case of a breach by any of the parties, the party is entitled to a compensation. Consequently, the terms of the teaming agreement shouldn’t be ambiguous or undefined. Therefore, it becomes necessary to know what all key points should be well defined in the Teaming Agreement.
> Parties: the agreement being signed by the two parties should specify the parties involved, specifying who the prime contractor and subcontractor are in case the parties decide to work together.
> Confidentiality: the majority of organizations seeking teaming agreements want to keep their agreements under wraps. A confidentiality agreement could do this. It is crucial to properly draft and construct the confidentiality clause in a teaming agreement, as it prevents any business information from being revealed.
> Exclusivity: When parties to an agreement enter into a teaming agreement, they often agree to work solely together on the project from preparation to submission of the project. If the parties land the project for themselves, the parties to the teaming agreement will need to establish a legal partnership, especially as the roles they take, that is, primary party and secondary party, and whether the project needs to be done solely together.
> Liability: Liability clause is also an important aspect of the teaming agreement. Teaming agreements typically include mutuality of obligations, which isn’t always the case. This means that either of the parties may be held accountable for engaging in breach of any of the clauses of the teaming agreement, like exclusivity, confidentiality etc. or for any damages suffered by the second party as a result of breach of intellectual property by the third party. In teaming agreements, each party is fully responsible for the accuracy of the information. Therefore, it is necessary that the Liability Clause be drafted in a way that clearly specifies the liability of each party in cases of breach on their part, and the clause should not be left vague.
> Termination: A teaming agreement’s termination clause is crucial for defining the conditions under which the agreement will expire. By providing a notice of termination, or by any other means which the parties to the agreement agree to, the parties may end the agreement.
> Dispute Resolution: In cases of a dispute or a disagreement arising between the parties agreeing to a teaming agreement, the provisions provided under the Dispute Resolution clause may be used to settle it. Any dispute resolution procedures and processes which are valid in the eyes of law, and applicable to the case can be provided under this clause, helping the parties in cases of a disagreement, looking for dispute resolution. The parties should also specify whether they would like to approach out of court settlement procedures, that is, ADR or Alternate Dispute Resolution, like mediation, arbitration, negotiation etc in cases of a dispute arising with respect to the agreement.
Some other essential clauses that must be kept in mind and should be included in the agreement while drafting a teaming agreement:
- Without the other party’s prior written consent, neither party may assign any of its rights or obligations under the Agreement, in whole or in part.
- Each party shall behave as a sole proprietor. Teaming agreements do not create any kind of agency, partnership, joint venture, or other joint connection. Both parties are prohibited from committing to anything that binds the other party and from claiming to be speaking for or acting on behalf of the other.
- No other revisions must be made outside of the written agreement; this teaming agreement reflects the entire and final understanding between the Contractor and the Subcontractor.
- The way of amending the agreement in certain cases should also be provided under the original agreement signed by the parties.
However, it is effective for the teaming agreement to set out some of the key clauses that will be included in the subcontract agreement, assuming that there is a successful tender bid. This is because the teaming agreement should not pre-empt a successful tender bid or be used to record the precise terms of the subcontract between the main party and the proposed subcontractor. The last thing one wants if the tender bid is accepted is for protracted negotiations to begin afterward in an effort to reach an agreement on the subcontract’s terms.
Teaming Agreements are a very viable means of success for various small- and large-scale companies who can work together on a project or tender by the way of a teaming agreement, while having limited obligations, shared financial risks and rewards and combined capabilities. However, at the same time, it becomes necessary for us, as lawyers and in the field of law, to understand that drafting a teaming agreement can be a tricky task, where the person drafting the agreement should make sure that all certain intricacies of the mutual agreement is covered, and all areas of dispute like dispute resolution, intellectual property, confidentiality, exclusivity etc. should all be clearly defined, with no signs of vagueness or ambiguity. A properly drafted Teaming Agreement is certainly one of the best means of contractual success for the companies.
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