Mind Your Fences

This is the first of a periodic series addressing legal issues of possible interest to the GSE industry.

This is the first of a periodic series addressing legal issues of possible interest to the GSE industry. You, of course, know best the issues that are of particular concern. We invite your questions and suggestions and will do our best to incorporate responses in future articles.

The New England farmers' adage of "good fences make good neighbors" is useful advice for business persons as well. Contracts are the fences that define the deal for businesses at many levels. Unfortunately, they are often boilerplate forms that are dispatched without a second glance or computer files whose tweaking is soon forgotten. Eventually, these agreements (yours or theirs) may no longer effectively enable you to obtain what you desire or to adequately protect what you desire to keep when things go awry. Just as farmers mind the fences each spring, it is time well spent to periodically review one's own agreements and to always review the other side's proposed agreement to ensure the lines are clear, understood and acceptable.

We address below some of the areas where one might invest in periodic review. Their drafting or omission can signal something of a company's character as well as affect the outcome of a project. Our approach is to follow through the sequence of a possible business deal.

The New Deal

Finding a new business partner or closing a new deal is a happy time. All too often, however, it is fraught with optimistic projections with too little attention devoted to defining the terms that will keep matters on track if the deal should stumble along the way.

As a preliminary note, not used as often as might be, a Memorandum of Understanding or Agreement ("MOU/MOA") can be a simple document that memorializes the key terms of a deal struck. It can confirm the presumptions, basis, key commitments and terms upon which the parties consider a deal to have been struck. Though often superseded by other agreements, an MOU/MOA can be a valuable instrument to dissuade a party from straying to the other's disadvantage.

A Teaming Agreement is often the critical first document that establishes the relationship and going forward efforts of new business partners. All too often the failure to consider their terms in some depth, or to skip one entirely, works to the detriment of one party.

Establishing the parties' business relationship from the outset is important, in the sense of it being a prime-subcontractor, or a joint venture of equals, or something else. This process will also dictate what other agreements may need to be struck.

Critical to the process is defining the Scope of Responsibility and/or Work for each party both under the Teaming Agreement and under the projected contract. Failure to do so can result in severe consequences—e.g., one party providing key assets on which the other party relies to win a project only to find itself largely excluded under the project. Depending on one's perspective, the more of the future contract that one builds or incorporates into the Teaming Agreement, the more secure it becomes should one party need to enforce it.

Equally critical for some is addressing issues about Proprietary Information and Intellectual Property (IP). This may include its handling, use, dissemination and remedies for misuse. Boilerplate language often needs to be tailored. If not already in place and incorporated, the agreement likely will include a Non-Disclosure Agreement (NDA) which should be viewed as serving a party's long-term interest of protecting its IP throughout and after the project. Like Non-Compete Agreements ("NCA"), which also may be incorporated in these agreements, they need to be drafted in a manner that protects one's interests but also can be enforced. All too often, one-sided NDA's and NCA's are so oppressive and expansive as to duration and scope, that they either expose entities or persons to unexpected liability or are themselves subject to challenge as too broad.

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