Enter into Contract on Behalf of Affiliates


From a licensor`s perspective, it may be best to work with a party as a licensee and avoid some of the above complications. On this basis, it may be preferable to allow the licensee to sublicense its affiliates rather than granting affiliates automatic license rights under the main license agreement. Some licensees are satisfied with this solution. It may be necessary to treat the issue of royalties for sales of affiliates differently from that of royalties for sales by independent sublicensees, but this is a question that may arise anyway as to whether affiliates are treated as sublicensees or as direct beneficiaries of the main license under the agreement. This practice is found in many types of trade agreements, including company agreements and intellectual property agreements. In IP Draughts` experience, it`s usually a terrible idea to include affiliates in an agreement in this way. But suppose you always choose that the parent assumes the obligations. In this context, I do not think it is useful to say that the parent company concludes the contract “on behalf of” the affiliate. By signing the contract, the parent company assumes obligations that apply only to the parent company and not to the affiliate, so the parent company enters into the contract on its own behalf. I agree that many trade disputes are not nuanced. Many are based on simple issues such as non-payment or seem to rely more on personalities and commercial firepower than on legal subtleties.

But even the gung-ho businessman should want to know how the contract would be interpreted if the disputed issue were to be taken to court. This knowledge will not prevent more fundamental business considerations from coming into play, but it will provide legal context. I remember, for example, Cambridge Antibody Technology v. Abbott Laboratories, which dealt with the interpretation of a royalty stacking clause. www.bailii.org/cgi-bin/markup.cgi?doc=/ew/cases/EWHC/Patents/2004/2974.html&query=title+%28+cambridge+%29+and+title+%28+antibody+%29+and+title+%28+technology+%29+and+title+%28+v+%29+and+title+%28+abbott+%29&method=boolean This case concerned the interpretation of detailed wording. The English High Court clearly chose CAT, but the parties later reached an agreement to settle the dispute, which arguably recognized Abbott`s greater commercial firepower. Sometimes it may be better to add the affiliate as an additional named party (which is signed separately), as in the case of an ADC where the information must be shared with the affiliate. In other cases, if the signing party has real control over the affiliate, your proposal may work. But whatever you do, don`t disguise it (in my opinion) by defining a party as including its affiliates for the reasons mentioned in the article above. In other words, joining affiliates as parties is likely to cause an unpleasant mess that can be handled by detailed contractual language (e.g. B deal with points 1 to 8 above), but this is often not the case. Do readers agree? Are there circumstances in which you feel it is appropriate to include affiliates in a definition of a party? Will the affiliates become bound by the parties by including them in the definition? The distinction between parties bound to a waiver and the fact that these related parties are the beneficiaries of a release was a major issue in last year`s Delaware Court of Chancery decision, Carlyle Investment Management L.L.C v.

Moonmouth Co. S.A., C.A. No. 7841-VCP, 2015 WL 5278913 (Del. 10 September 2015). In Carlyle Investment, the Court considered the effect of a broad waiver of claims contained in a transfer agreement. It was obviously clear that the publication was intended to publish and publish not only the parties mentioned, but also a list of related companies and persons. The question was whether those companies and related persons were also bound by the waiver in favour of the other party and its related parties. Ultimately, the court was ultimately unable to decipher what it called a “mutilated case study project” and therefore requested a full process to determine the true intent of these parties and the real or apparent power of these parties to bind the other list of persons and entities defined together as “related parties.” Importantly, however, the court clarified that it rejected the argument that the companies and individuals included in the list of terms that together include “related parties” could never be bound by the release simply because they had not signed the release on their own behalf or had been expressly designated as parties.

The term “related parties” was defined in the press release to refer to the “current and former affiliates of such parties and all agents, agents, officers, directors, employees, officers, officers, parent companies, shareholders, partners, members, principals, subsidiaries and controlled entities, heirs, executors, directors, successors, assignees, sister or affiliated companies and Partnerships”. In most cases, it is sufficient to stipulate that some companies are considered related companies, even if the relevant legal relationships are not considered controlling. The Small Business Administration (SBA) determines affiliation in several ways: This mass wisdom (discussion of CCA members) addresses the question of whether a holding company should enter into one or more Master Service Agreements (“MSAs”) with its subsidiaries and suppliers, as well as best practices for mitigating potential liabilities. This resource has been compiled from questions and answers published in the CCA`s Corporate and Securities Law Forum.* We often sign global service agreements that require the parent company to sign “for and on behalf” of an affiliate. What do you think of this practice? The criterion of contractual intent must be assessed objectively: it does not matter whether one of the parties subjectively believed that it was not related. However, the objective test does not result in a contract where one party knows the truth about the other party`s lack of intention to be legally bound. Mark, excellent article and I totally agree with your comments. I could never have imagined a good reason to define a party to include affiliates, and I will always thwart such projects. Keep up the good work on the blog.

All the best for 2014, George Philip H. Geier Jr. Irrevocable Trust and The Geier Group, LLC, as RELEASORS, . releases and its affiliates, subsidiaries, parent companies, heirs, executors, directors, successors, predecessors and assigns, or persons acting on behalf of any or all of the above-mentioned persons, from all acts, causes of action, . Covenants, contracts, . Claims and claims of any kind, known or unknown, at law, admiralty or equitable, that against RELEASEES, RELEASORS and affiliates, subsidiaries, parent companies, heirs, executors, directors, successors, predecessors and assigns have already had, now or may have in the future, for or by reason of any question, reason or thing from the beginning of the world to date from the date of this RELEASE. In the Mozido decision, which was rendered on September 29 of this year, the Delaware Court of Chancery granted a motion to dismiss a lawsuit brought by an individual plaintiff, Philip H. Geier, against defendants who received a waiver of claims received and signed exclusively by entities whose individual plaintiff was an “affiliate,” but not by the individual applicant himself.

The only disclosing parties named in the general press release at issue in Mozido were Philip H. Geier Jr. Irrevocable Trust and The Geier Group, LLC. And the person who signed on behalf of these two companies was co-trustee of the Geier Trust and co-manager of the Geier Group named Hope Smith. Philip H. Geier was also a co-director of the Geier Trust and Chairman of the Geier Group. Apparently, he also controlled both companies, but the court noted: From the licensee`s perspective, it is understandable that the license is extended to the licensee`s affiliates (i.e., group companies). There are several ways to do this, which are discussed below. Adding affiliates to the licensee definition may seem superficially appealing – a quick fix – but it comes with some difficulties. To answer your question, I would not require a parent to sign a contract “in the name” of an affiliate.

Instead, my preferred option would be to get the affiliate signed and make the parent the guarantor. My second choice would simply be to let the parent sign the contract without a “name of” language. If the natural conclusion is that the affiliates have become parties, this raises several other questions, including: If Company A and Company B enter into a contract, it is possible that a current or future subsidiary of Company A will one day become a competitor of Company B. This subsidiary (let`s call it Company C) could also be an entity with which Company B did not want to do business for some reason. It is important for Company B to consider whether the rights and obligations that Company C could acquire as an affiliate could be detrimental. It is important to note that companies that are largely owned by investment companies covered by the Small Business Investment Act (1958), as amended, are not considered affiliates. This also applies to development companies that are eligible under the law. In 1897, Oliver Wendell Holmes, Jr. stated in an essay published in the Harvard Law Review that “entering into a contract is not .

. . the parties wanted to say the same thing, but the same thing because of their statement. Very well! Holmes` statement is a brief summary of the contractual approach to interpreting written agreements that Delaware and New York claim to follow. .