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Conference held in Barcelona for International Technology Law Association in 2008
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International Technology Law Association
BARCELONA – November 7th 2008
Liability Provisions in
joint-venture agreements
André MEILLASSOUXPartner ATM Avocats, Paris
[email protected]://www.atmavocats.com
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Summary :I – Introduction : the parties’ concerns in a big IT projects executed in
common A.Common ConcernsB. Client’s concernsC. Contractors’ concerns
II – The schemes of teaming agreementsA. No creation of a legal entityB. A vertical scheme : prime contractor and subcontractors ?C. A horizontal scheme : teaming agreement of “co contractors”?
III – The special clauses A. Solidarity (severability) ?
B. An agreement to divide financial commitments in case of non performance ?C. limitation of the responsability ?
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1. Introduction : the parties’ concerns in a big IT projects executed in common
A. Everybody’s concern : . a clear scheme of who does what . A solid partnership
B. Client’s special concerns :. One interlocutor : a lead contractor. Certainty that he will be in a position to
enforce contractors’ commitmentsC. Contractors’ special concerns
. Be liable : yes
. But of its own failure only
. A certainty that he can have an action against a failing partner
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II. The schemes of teaming agreements
A. No creation of a legal entity
B. A vertical scheme : prime contractor and subcontractors ?
C. A horizontal scheme : teaming agreement of “co contractors”?
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II. The schemes of teaming agreements
A. No creation of a legal entity
. No company
. No situation where unexpected rules could applysuch as “company in participation” (no legal body, but rules of a de facto company apply)
. Inclusion of the usual clause :“Nothing in this Agreement shall be deemed to constitute or give rise to a corporation, partnership, agency, joint venture or contract of employment between the Parties.”
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II. The schemes of teaming agreements
B. A vertical scheme : prime contractor and subcontractors ?
The prime contractor is fully liable vis-à-vis the clientAnd is solely responsible for the fulfillment of their committments by the subcontractors
Client
Prime contractor
BA CSubcontractors
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II. The schemes of teaming agreements
C. A horizontal scheme : teaming agreement of “co contractors”?
The question are : . What is the role of the lead contractor : just a representative or more ?. whom the client can sue in case of a failure whose autor is not clearly determined ?
CLIENT
CBA
« Co-contractors »
One of the contractors is the « lead »
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III – The special clauses : solidarity
A. Solidarity (severability) If the contractors are just “joint”, each is only responsible for its own failures or non executions, on its own domain of interventionIf the contractors have agreed to be in “solidarity”( “severally liable”), the client can adress any of the contractors and request either an action or damages. Then the contractors will have to manage the problem between themselvesThe “solidarity” must be expressly mentionnedIt is a benefit only to the client
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III – The special clauses : A) solidarityTeaming agreement of “co contractors without “solidarity”
In case of a failure, the client has no immediate solution : the lead contractor will only be committed to a transmission of the client’s request to the contractors
If the autor is not clearly determined, the client will not know : whom to request an immediate action or whom can he sue to get damages.It is his duty to prove who has failed.
CLIENT
C?
B?
A?
« Co-contractors »
One of the contractors is the « lead »But is only a coordinator
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III – The special clauses : A) solidarityTeaming agreement of “co contractors with “solidarity”:There is no “gap” between the contractors
In case of a failure, the client has an immediate solution : If the autor is not clearly determined, the client can request an immediate action and can sue to get damages any of the contractors, whithout having to prove who has failed ?
CLIENT
CBA
« Co-contractors »
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III – The special clauses : B) sharing of the responsability
B. An agreement to divide financial commitments in case of non performance ?
Clause proposed in the agreements between the contractors:
“If the responsibility or cause of the non-performance cannot be attributed with certainty, the Parties shall share, at least until such time as the liability of each of the Parties may be allocated more precisely, any costs, losses, damages or expenses resulting from such non-performance pro rata on the basis of their share of the aggregate sums due under the Client Agreement”
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III – The special clauses : C) limitation of the responsability ?
C. Should a clause mitigate the liability between the cocontractors ? The general limitation is in the agreement between the contractors
and the client. The risk lies mainly in an action that the client could introduce
against the consortium.All “non liability” clauses should be excludedNo special limitation should be introduced, except a general
limitation with reference to the amount agreed with the client
Clause proposed in the agreements between the contractors:“Each Party shall be liable for and shall indemnify the other Parties (or any of
them) against any costs, losses, damages or expenses suffered or incurred by the other Parties (or any of them) as a result of the first Party's non-performance of any of those Services for which that Party is responsible under this Agreement, in the limits of the amounts agreed with the client in the main agreement.”
International Technology Law Association
BARCELONA – November 7th 2008
THANK YOU
André MEILLASSOUXPartner ATM Avocats, Paris
[email protected]://www.atmavocats.com
