5 Types of Contracts Every Nonprofit Should Know About By: Erin McClarty Esq.
Summary Familiarize you with agreements your organization may cross during operations. Suggest concepts you will want to be thinking about when negotiating Equip you with resources and direction to make sure your organization is covered
License Agreements
Agreement that gives one party conditional rights to use intellectual property owned by another party.
LA: Ways You’ll Encounter Hiring someone to develop or build something for you Wanting to use someone else’s I.P. such as a speech or software
Allowing someone to use your I.P. such as your logo
LA: Concepts to Think About What parameters must your organization operate in? Will the software or product get fixed if its incorrect? How? Does anyone else have rights in it?
LA: Covering Yourself Understand “use” and restriction clauses Detail what you expect to receive and how you expect it to work What falls under warranty? How must it be fixed? By when?
Representations (a promise) that seller/developer has title and rights in what is being sold Get an “indemnity”
Commercial Leases
An agreement between a business and landlord allowing the business to rent a building or space.
CL: Concepts to Think About Maintaining flexibility for your organization What does your organization need the space for? What are your organizations obligations under the lease? Once the lease terminates?
CL: Covering Yourself Assignment/Subletting clause in case you grow Language allowing for alterations to the space Covenants and warranties “Quiet Enjoyment” and “Warranty of Use” What do the Maintenance, Default and Restoration clauses say
Non-Disclosure Agreements
Agreement between two parties where confidential or proprietary information is being exchanged and they don’t want that information getting to third parties.
NDA: Ways You’ll Encounter Selling or buying proprietary rights ex. patent to a product
Providing goods or services to people Collaborating with another organization
NDA: Concepts to Think About When must your organization comply? i.e. when is the agreement triggered? What does the agreement apply to? How long does the agreement apply?
NDA: Ways to Cover Yourself Define what type of information is “confidential information” Make clear what circumstances or purposes trigger the agreement Include instances or “exclusions” that don’t fall under ALWAYS have a time limitation
Master Service Agreements
Agreement between two parties detailing the terms of future services being provided
MSA: Ways You’ll Encounter When having services continually provided Allows you to skip negotiating terms each time Can give you leverage in pricing Have a steady source for services Will often deal with in things like uniforms, coffee and copy machines
MSA: Concepts to Think About Price and payment terms What services are covered What happens if the services aren’t as promised Who is responsible if property is damaged or people are hurt When will the agreement terminate
MSA: Covering Yourself Outline what specific services are covered by the agreement Get warranties for the service. Detail how defective services must be remedied Pay attention to the indemnity and liability provisions Avoid “evergreen� termination clauses
Purchase Agreement
Agreement between two parties detailing terms for the sale of goods.
PA: Ways You’ll Encounter Purchasing equipment or goods for use by your organization Purchasing parts for any products your organization might make
PA: Concepts to Think About What are the warranties Who is responsible for delivery and if something happens during delivery How has intellectual property been addressed What happens if someone is hurt using the product
PA: Covering Yourself Spell out warranties as addressed before Pay particular attention to delivery terms. Are Incoterms being used? When does title and risk transfer? Who gets rights to the information, data, etc. in the product? Is it to your specifications? Or off the shelf? The seller should always be responsible for injuries that occur from a defect in their manufacturing. Indemnity provisions important when goods involved
Things to Keep in Mind Mean what you say and say what you mean No “here-to-fortherein� phrases Avoid boilerplate Sit down and think the whole transaction out
Resources Local state bar or organizations may help with review In Texas there is TALA, HVLP and Texas-Cbar Learn basic contract principles http://www.nolo.com/legal-encyclopedia/contract-basics Look at contract repositories for ideas http://smallbusiness.findlaw.com/business-forms-contracts/ Utilize outsourcers
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