As the world becomes more sophisticated so do framework agreements. We work with main contractors and intermediaries to reduce risk and enhance profitability.
Please do call to discuss your framework agreement. We do give initial assessments and fee estimates.
Reasons for picking us
We have the blend of experience you need and a supporting track record.
- We are flexible in how we work always providing the level of service you have asked for.
- We seek out areas of highest risk and focus on the important aspects.
- Years of experience leaves us attuned to the discrete commercial drivers often at play. Our aim is always to find robust solutions to reduce commercial risk we a keen eye on your legal costs.
To help you understand issues which we find can arise we have explained some pointers for you.
- Operational issues under a framework agreement and sub-contract;
- Payments under the sub-contract;
- Preservation of rights;
- Default provisions;
- Resolving disputes.
Operation of the framework agreement and sub-contract
There can be many contracts in place in a framework contract situation and to help you understand the headline points we have briefly explained how the contracts typically fit together:
The framework agreement
The framework agreement is often styled as an umbrella agreement under which tenders are issued for the supply of a range of goods and services to the end user. A typical framework agreement permits the issue of a variety of tenders for a variety of supplies to a variety of potential bidders. Consequently, the framework agreement is usually a set of generic boiler plate provisions under which the detail of each tender can be slotted in. The parties to a framework agreement will be the end user and the main contractor.
The intermediary or sub-contractor’s agreement
The intermediary or sub-contractors agreement is the agreement entered into between the main contractor under the framework agreement and the service supplier. The end user is not a party to the sub-contract. However, the main contractor needs to ensure that all of its liabilities are passed down to the sub-contractor. This is because legally it is the main contractor who is responsible for delivery under the framework agreement and any tender documents.
The consultancy agreement
Often sub-contractors delegate certain aspects of the work to specialist consultants brought in for a specific job on a specific sub-contract. The parties to the consultancy agreement will be the sub-contractor and the consultant.
Every framework agreement, sub-contract and consultancy contract is different. The terms depend on the type of business, the nature of the work, and the consultant. Nevertheless, the function, responsibility and payment terms are always a focus in every commercial agreement.
Typical issues arising under a framework agreement
We will consider:
- Flow of risk and indemnities under the framework agreement.
- Data protection liabilities.
- Preservation of intellectual property rights and confidential information.
- Payment terms and default provisions.
- Termination provisions.
- Rights to dispute resolution, mediation and timescales.
Payments under the sub-contract
As a rule of thumb, an individual trading as a self-employed consultant will pay less tax than an employee earning a similar gross amount. HMRC have a number of anti-avoidance measures that can be deployed. Where the agreement facilitates payment to a lower tax jurisdiction, then transfer pricing can be in play.
- HMRC has issued many clients with tax assessments, claiming payments to consultants should have been subject to tax and national insurance under PAYE. Besides the tax assessment, HMRC also claims interest and penalties.
- HMRC often targets the end user, rather than the consultant who may be hard to trace or enforce against. HMRC can assess liabilities years after the consultant ceased to provide services.
- Simply contracting via a limited company will not deter HMRC from a challenge if they can find a way to assess additional tax.
We usually draft tax indemnities to help guard against the risks.
Preservation of intellectual property rights and confidential information
Problems arise where consultants create or modify existing intellectual property for the end user. Intellectual property spans e.g. software, design rights, trade marks, patents, enhancements, business plans and processes.
End users should protect their confidential information. Otherwise, end users discover the consultant subsequently trades on the IP, the IP that the end-user paid the consultant to develop, and assumed belonged to the end-user.
- Ideally, ensure there is an assignment of intellectual property provision built into the agreement. Restrictions should be placed on the use of confidential information where this could be used to detract from the end user’s business.
- We have acted for businesses who have paid former consultants substantial sums to secure their intellectual property because the assignment clause was inadequate or missing.
- Often these problems only emerge during the due-diligence process when the end-user’s business is being sold.
Only when the consultancy does not go to plan does anyone looks at these provisions. One key focus area is how to prevent delays in delivery of work. Timescales do require thought in advance of problems arising so that contract delivery can continue.
- If there has been a breach of the agreement, clauses such as non-compete may be unenforceable.
- Every attempt should be made to resolve disputes quickly and efficiently without recourse to litigation. Litigation is usually the worse scenario. A tailored dispute resolution mechanism with reference to independent experts where necessary can be very useful.
- Cash flow is as important to consultants as it is to the end user. You need to think about when the consultancy fees will be payable and back this up against a corresponding receipt of funds if cash flow is to be evenly managed.
- There may be situations where you need to terminate the contract with the consultant. Alternatively, you may wish to retain the power to assign the agreement to third parties. You may find yourself in difficulty if the points have not been addressed.
- Disputes do arise over powers to substitute other contractors and this is an area that in some businesses should be clearly set out in the agreement.
- Where we are acting for consultants who have been promised resources to help them perform the contract within the price agreed, we examine the contractual obligations on the end user to deliver as promised.
Besides drafting and reviewing contractual terms, we manage disputes. We’ll tell you how to resolve the dispute and achieve the best outcome, given the circumstances. We:
- review the framework, sub-contract and or consultancy agreements. What’s more we provide an honest view as to where the liability falls.
- inspect your evidence, then advise whether you’ll prove your claim.
- attend mediation meetings alongside you. We’ll present your case, and elevate your position.
- bring or defend claims, if mediation or negotiation doesn’t resolve the dispute. Our team comprises specialist commercial litigation solicitors.