The inportance of a good contract
I attended the meeting arranged by Mikronet and Erhvervsråd L-F on the 16th of January and had a most enjoyable and useful day.
The main points made by Lawyer Peter Lind Nielsen were that it is of major importance to be clear about the legal difficulties which are involved in any sort of collaborative agreement – be it as purchaser and subcontractor: a consortium working on a common project, or simply a group sharing office and facilities. And that a verbal agreement is binding in Denmark.
Many Micro and SMEs get into trouble by not reading agreements thoroughly before signing. There are many pitfalls, to mention just a few of the many that Peter covered –
• The delicate area of pricing one’s services or goods – prices on the Internet are binding so always make sure that unless you are absolutely sure that you can supply the services for the price listed, add a statement that price is subject to change, the prices given are only suggestions and are to be confirmed by mutual agreement.
• Whether subcontractors and/or as equal partners – no poaching or contacting the other’s existing customers outside of the particular project.
• Always take a worst case scenario and plan for it in advance; it will save a lot of unpleasantness later:
E.g. what if one of the group dies; Long-term illness etc.
• Sort out things like exchange of skills, a leader, equal contribution – who provides what services
• And what do I expect to get out of the collaboration and what do the others? Get it clearly stated and agreed.
• What do each contribute?
• How are we invoicing – Each other or the customer only?
• How do we work out who has done what and what share they are entitled to? Time logs or ??
• Agree what each partner has spent and update the contract every 6 months, it is not a static document. Also sort out who has the right to any work – the person who makes the material has the right to it. e.g. software, photographs etc.
Grasp the nettle and face the fact that if you cannot agree at this stage, then it is unlikely that you’ll agree later, so sort things out before signing any agreements. Think how easily neighbours fall out over trivia – micros live their business heart and soul and expect others to show the same intense loyalty.
You must have a contract.
A consortium must have a leader who keeps control of the whole project and ensures that all members are kept informed of what is happening –copied in on email or given access to a common platform where all aspects of the project are stored..
Borsens website has a useful set of tools incl NDA template and template for agreement but they are in Danish