International Contractual Alliance

This Model Contract is a framework for an Alliance or collaboration between two Parties where no separate jointly owned corporate entity is created. The Alliance is based solely on the contract between the Parties. (It is sometimes also called a contractual joint venture.) 1. Each contractual Alliance or collaboration is different. This Model Contract provides a series or a “menu” of possibilities depending on the purpose of the Alliance. Provisions that are not relevant to the particular Alliance should be deleted. 2. The Model Contract contemplates the formation of a management Committee on which the two Parties are jointly represented. It may be appropriate in some cases (i) to spell out the authority of particular individuals or subcommittees and/or (ii) to ensure that certain “reserved matters” require unanimous decision. 3. The Model Contract contemplates that the two Parties will share 50-50 in costs of the Alliance. It is important to establish what types of costs are to be shared. If a party is to be paid for its work or other contribution, the basis for remuneration should be clearly established either at the outset or through the Management Committee. 4. Article 3 contemplates that each party will have areas of responsibility to contribute towards the success of the Alliance. In some cases these will be expressed in general terms and not involve formal legal commitment. In other cases, specific legally binding commitment will be appropriate. 5. Article 6 sets out provisions for a relatively straightforward sharing of knowhow and technical development. In some cases (e.g. where intellectual Property rights are of vital importance), more detailed license or other contracts will be necessary. 6. Establish the duration of the Alliance. Will it have a specific term with subsequent renewal requiring mutual agreement? Or will it continue indefinitely subject to a party’s right to terminate − either unilaterally by notice or in specified circumstances? 7. A contractual Alliance does not usually involve the creation of a separate profitmaking business in which the Parties share profits as well as costs. If the arrangements do involve income or profit-sharing, be aware of (i) the need for advice on the tax implications and (ii) the danger that, in many jurisdictions, each party could become jointly liable to third Parties for any claims (caused by whichever party) arising out of activities of either party connected with the Alliance. 8. If the venture does involve a separate profit-making business, this will normally require a more formal “partnership” agreement or the creation of a corporate joint venture.