What is a Teaming Agreement?
A Teaming Agreement is an agreement between two or more of parties who agree to work on a project (usually tenders) together, by tapping on each other’s resources. In simpler terms, Teaming Agreements are agreements wherein the parties to the agreement ‘team up’ for a project.
A Teaming Agreement allows the parties involved to combine their resources, capital, skillset, etc. for the furtherance and completion of a particular common objective. The parties can be categorised into two groups. The Primary party is primarily responsible for the completion of the project and approaches the other party, the Subordinate party or Subcontractor, which helps the Primary party complete certain tasks and provides them with the resources required for the completion of the project.
Issues that may arise while entering into a teaming agreement
Due diligence is necessary, especially for the Subcontractor, to ensure that the Primary party does not abuse their position as leverage.
There may be times when the two parties while intending to achieve the same objective, may not agree on certain terms, rights, obligations and sometimes even the enforceability of the agreement, which is technically the validity of the agreement in the eyes of the law. The lawyer or legal expert drafting the Teaming Agreement must ensure that the Terms and Conditions in the Teaming Agreement are drafted in such a way that improves the chances of enforcement in the eyes of the law, as Teaming Agreements are vulnerable to enforceability issues.
Parties may want to take the following steps to ensure that the obligations contained in the Teaming Agreement are enforceable:
- Type of agreement intended to be signed.
- Duration of work
- Scope of work
- Necessary requirements of every party for the completion of work
Teaming agreements are crucial and necessary for the parties when they submit bids for a common project. There are a number of benefits, as well as drawbacks of Teaming Agreements. In order to protect the parties involved, the agreement must be carefully structured so as to prove enforceability and ensure that in case of a breach by any of the parties, the victim party is entitled to compensation. Consequently, the terms of the Teaming Agreement shouldn’t be ambiguous or undefined. Therefore, it is necessary to have all key points well defined in the Teaming Agreement.
- Parties: The agreement should clearly specify the parties involved and their relevant positions.
- Confidentiality: The vast majority of organisations seeking Teaming Agreements would want to keep their agreements under wraps. This can be achieved with a confidentiality agreement or clause. It is crucial to properly draft and construct the confidentiality clause in a Teaming Agreement, as its purpose is to prevent any confidential business information from being revealed to the public.
- Exclusivity: When parties enter into a Teaming Agreement, they often agree to work solely together on the project from its preparation phase to submission.
- Liability: A Liability clause deals with accountability for breaching of any of the clauses of the Teaming Agreement, such as exclusivity, confidentiality, etc., or for any damages suffered by the other party as a result of; but not limited to, a breach or negligence. The Liability clause should be drafted in a way that clearly defines the liability and consequences in cases of breach.
- Termination: A Teaming Agreement’s Termination clause is crucial in defining the conditions under which the agreement will end. By providing notice of termination, or by any other means which the parties have agreed to, the parties may end the agreement.
- Dispute Resolution: In cases of a dispute or a disagreement arising between the parties, the provisions provided under the Dispute Resolution clause may be called into play. Parties should also specify whether they would like to attempt out-of-court settlement procedures known such as mediation, arbitration, negotiation etc.
There are other essentials that must be kept in mind and should be included in the 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 party.
- No other revisions must be made outside of the written agreement. The Teaming Agreement reflects the entire and final understanding between the Contractor and Subcontractor.
- Manner of amending the agreement under certain circumstances should also be provided under the original agreement signed by the parties.
Teaming Agreements are a viable option for small- and large-scale companies who look to work together on a project, while having limited obligations, shared financial risks, rewards and combined capabilities. At the same time, it is necessary to understand that drafting a Teaming Agreement can be a tricky task. We need to ensure that all possible intricacies are covered, and all areas of dispute such as dispute resolution, intellectual property, confidentiality, exclusivity, etc. should be clearly defined, with no vagueness or ambiguity.
Please note that this article does not constitute express or implied legal advice, whether in whole or in part. If you require legal advice, please contact us at: firstname.lastname@example.org.