What legal implications should practices consider when entering into a collaboration? :
When agreeing to enter into a collaborative arrangement practices need to take various considerations into account and make some decisions on the following:
Decide on the extent of the collaboration.
If an informal co-operation for a specific purpose is intended (say for tendering for a particular project or series of projects) care needs to be taken not to create a wider or exclusive arrangement that unwittingly weds those organisations beyond what was meant. A party does not want to find that it has stifled its creative energies and restricted its flexibility by having to involve its new 'partner' in all future initiatives. If the arrangement only exists for a one-off opportunity, then this should be stated. Similarly, if the parties are to be free to explore associations with other organisations if discussions with the present collaborator do not bear fruit, that too should be provided for, together with any restrictions in that regard.
The nature of the collaboration needs to be agreed and clearly expressed
Arrangements of this type can range from an informal agreement to co-operate, to a loose and limited association between two or more organisations, through to a formal joint venture agreement, which involves the creation of a separate legal entity. If this last arrangement is not intended, then clear language to that effect is needed, setting out the limits of what are the parties' intentions. A joint venture company will need its own governance; accounts; arrangements for how expenses are to be borne and profits shared; appointed representatives to conduct the everyday business of the joint venture; procedure for preventing deadlock and dispute resolution.
Joint Appointments vs. Sub Consultancy
Depending on what the collaborating parties decide, they may want to be appointed jointly under a single appointment with the commissioning client, and either to have their responsibilities and liabilities clearly separated in the appointment; or alternatively they may wish to keep their individual organisations separate (ie not form a joint venture) but nonetheless be appointed jointly under a single appointment, without individual services being delineated between the two entities. The latter arrangement is likely to involve each of the appointed consultants in being jointly and severally liable for all of the services signed up to, in which event those consultants would need to clear the arrangement with their professional indemnity insurers and to be satisfied that those insurers are prepared to protect their insured's liability arising out of the other party's/parties' default. In other words, the Insurer of collaborating Party A will not provide protection for collaborating Party B's services; however, if under the operation of joint and several liability, Party A is held responsible for Party B's default, because they have been jointly appointed, Party A will want to know that it has the backing of its Insurers. The benefit to each insurer will be the knowledge that the insured is working with another entity who can bridge any 'skills gap', thereby reducing the overall risk. It is usual, anyway, for there to be provision as between the collaborators, for the 'guilty' party to compensate the 'innocent' to the extent that the latter has suffered a loss for which the former bears culpability.
A yet further alternative would be for one party to be appointed as Head Consultant by the commissioning client, and for that Head Consultant to appoint the other party as its sub-consultant. That would give the commissioning client a single point of contact and would require the Head Consultant to make sure that it had appointed its collaborator on terms that mirror its contract with the commissioning client.
Other considerations
At an early stage in discussions, the parties would be well advised to enter into a confidentiality or non-disclosure agreement, enabling them to discuss freely their proposed innovations relating to the enterprise on which they are proposing to collaborate. A request for an NDA is now fairly usual and is unlikely to be badly received if the other party is entering into the discussions in good faith; the drafting of such a document needs, though, careful attention so that it is clear what materials are to be treated as confidential and what losses are agreed as being likely to flow from a breach. The detail of the collaboration between the parties can follow.
Mark Klimt is a Partner and head of DWF's Non-Contentious Contract Advisory Service, working with the insurance sector.
To find out more about collaboration and how you can connect via our Collaboration Network, visit our Collaboration Network page.
