AGREEMENT REVIEW CHECKLIST

February 5, 2023

AGREEMENT REVIEW CHECKLIST

MAP/ARTWORK SERVICES AGREEMENT

I have gone through the Agreement. In this review, I have made my comments and thoughts regarding the Agreement. 

  1. SECTION 1

This Section provides the term for your Agreement, and the compensation schedule. I find an issue with the length of the term. Five years is too long. 

 

The major disadvantage of signing a contract with such a long term is that you will be entrapped. For instance, you may lack the flexibility to leave the agreement before the five years end, if you are not comfortable with the terms thereof. 

  

I recommend you have the term reduced to a lesser duration. Also, you may consider adding a clause stating that you are free to include a termination clause. In the termination clause, you may state that either party is free to terminate the Agreement for any reason, upon giving the other party a written notice of like one or two weeks. 

 

  1. SECTION 2

This Section clearly states the services you’ll offer under the Agreement. 

 

However, I find an issue with the provision that states that when you “cannot physically perform the duties …, then the Independent Contractor Agreement will cease, and the Purchase Agreement Clause will take effect.” This provision is too broad. It does not address the situations when you are temporarily unable to physically perform the duties because of the occurrence of a frustrating events. 

 

Frustrating events (also called “force majeure” events) are events that happen out of the control of parties to an agreement, which make it impossible (temporarily or permanently), for the parties to fulfill their obligations under the Agreement. Such events include fires, floods, lightnings, earthquakes, elements of nature or acts of God, riots, civil disorders, rebellions, acts of terrorism, pandemics (including COVID-19), epidemics, or revolutions in any country, or any other similar causes. 

 

Sometimes, such events may not render you permanently unable to physically perform your duties. Therefore, the provision in your Agreement is so restrictive that in the event you cannot perform your obligations, even temporarily, your business will be purchased. I find that too restrictive. 

 

  1. SECTION 3

This section states that you may extend the term of the contract at your will, at one-year intervals. I find no issue with this provision because it is left very open such that you may only extend it at your will/wish.

 

  1. SECTION 4

This Section provides that the hiring company shall purchase your business. 

 

In many Agreements for Independent Contractors, the work product is always termed a “work made for hire”. Work made for hire is a statutorily defined term under 17 U.S.C. § 101. Notably, a work for hire is not created merely because parties to an agreement state that the work is a work for hire. It is an exception to the general rule that the person who actually creates a work is the legally recognized author of that work. Therefore, the hiring parties always reserve the right to the Intellectual property of the works. And for that reason, it is not uncommon to find hiring companies requiring the works back at the end of the Agreement term.

 

However, for your work amount to a “work made for hire”, the Agreement must expressly state that the work is a work made for hire. If there is no term in the Agreement that identifies the work as a work made for hire, the hiring party has no right to require the work back. 

 

Therefore, I recommend you edit the term in Section 4 that makes it mandatory for the hiring company to purchase your business and/or the works. You may edit it to make the purchase subject to your permission and/or written consent.  

 

  1. SECTION 5

This Section emphasizes on three terms. First, it states that you shall be working on a full-time basis. Next, it emphasizes on the five-year term. Lastly, it restates the mandatory purchase by the hiring party. 

 

Having already looked at the issues of the five-year term, and the mandatory purchase of your business and/or works, I shall only focus herein on the full-time basis issue. 

 

Remember, Section 1 stated that you are an Independent Contractor. This means, you are not an employee of the hiring company. Also, being independent, you will have to file your tax returns for the period covered by the contract. Another very important characteristic of Independent Contractors is that they are free to engage in other businesses while under the Agreement. Accordingly, as an Independent Contractor, I find the requirement to work on a full-time basis as unnecessarily restrictive. 

 

Therefore, seek to scrap off the provision on full-time basis. 

 

In your instructions to me, you also provided some more areas you were concerned with. They include selling a sole proprietorship, employment as an independent contractor, survival clauses, assignment clauses- should the company that would buy yours be sold, non-compete restrictions, and intellectual property. 

 

I have already discussed some of the concerns you raised. These are selling your proprietorship, employment as an independent contractor, and intellectual property. Therefore, I shall not discuss them again. I shall only focus on the other areas I have not covered. 

 

SURVIVAL CLAUSES

Survival clauses are necessary if the parties to the Agreement wish to have a term/provision persist after the contract’s termination. These clauses are important to consider because they may cause certain rights or liabilities to continue even after the end of the contract. Survival clauses should only be included if there is a commercially justified objective to extend the obligations.

 

It is essential for Survival Clauses to be specific. The generality of this clause can lead to interpretation issues and contractual disputes. Therefore, it is wise and prudent to only limit the Survival Clause to a specific term/provision/section of the Agreement. 

 

I recommend that you only apply the Survival Clause to the Confidentiality provision of the Agreement such that both parties may keep confidential the other party’s secrets even after the termination of the Agreement. 

 

Such a Section would read, “The Parties’ obligation as outlined in Section XYZ of the present Agreement shall remain in full force and effect following the termination of the present Agreement for any reason or cause.”

 

ASSIGNMENT CLAUSES

An assignment clause spells out which contractual obligations, rights, and duties may be transferred from one of the parties to another party. The assignment may be in whole or in part, and the clause also details the conditions under which a party can assign these duties.

 

It is common for contracts to include a provision that a party can only assign its rights under the contract with the consent of the other party.

 

After assignment, the assignee (the party to whom the contract has been assigned) is entitled to the benefit of the contract and to bring proceedings (either alone or by joining the assignor (the party assigning the contractual obligations)) against the other party to enforce its rights.  The assignee does not become a party to the contract with the promisor.  If the burden or obligations of the contract cannot be assigned, the assignor remains liable post assignment to perform any part of the contract that has not yet been performed.

 

In your agreement, the hiring party is the only one that is permitted to assign the Agreement. The section just before signatures (after Section 5) states in that regard that, “… FR will agree to only provide map services for JRW and JRW agents.” 

 

You should note that rights and obligations of specific people can’t be assigned because special skills and abilities can’t be transferred. This is called specific performance. In your Agreement, for example, the hiring company contracted specifically for your services. Therefore, they expect to get your services alone, directly, because of the specificity of the services you do. 

 

Therefore, I recommend that you leave the assignment provision as is because of specific performance. Alternatively, you state that you will not assign or otherwise transfer your obligations under the Agreement without the prior written consent of the hiring Company.

 

NON-COMPETE 

This provision is a provision under which one party (usually the Contractor) agrees not to enter or start a similar profession or trade in competition against the hiring party. It prohibits a party from using its skills and knowledge for a set period of time after the Agreement, either by working for a competitor or by recruiting business from current clients. 

 

Generally, Courts tend to disregard restrictive clauses because they limit the party’s opportunity to do business even after termination of the Agreement. 

 

In your agreement, there is no provision for a non-compete section/clause. Remember, such restrictive clauses always tend to be against contractors. Therefore, I recommend you do not seek to include a non-compete clause, so you be free to do your business. 

 

I hope my comments and recommendations have been of much help.

 

Regards! 

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