Mutual Business Agreement: Everything You Need to Know
A mutual business agreement is a contract between parties working toward a common goal.3 min read
A mutual business agreement is a contract between parties working toward a common goal. This type of arrangement may also be called a joint venture agreement or mutual cooperation agreement. Mutual business agreements vary based on the type of transactions they govern. However, a few elements, such as mutual releases and mutual nondisclosure agreements, are common to most contracts.
The Basics of Mutual Business Agreements
A mutual business agreement should include:
- The names and addresses of the parties involved.
- When the agreement takes effect.
- The terms of the agreement.
- A general description of how the parties will work together.
- How the parties can terminate the contract and what type of notice is required.
A sample agreement might say, "Company A will provide regular referrals to Company B. For each referral, Company B will pay $1,000 to Company A."
What Does a Contract Need to Include?
A mutual business agreement contract that is legally binding should contain:
- Consideration: The parties agree to exchange something that has value. The contract cannot restrict one entity without requiring the other to make a payment or provide a service in return.
- An offer and acceptance.
- A legal purpose.
- Capable parties: Individuals 18 years of age or older, who are of sound mind.
- Mutual assent: Both sides must understand and agree to the terms set forth in the mutual business agreement.
Mutual Non-Disclosure Agreements
A mutual non-disclosure agreement (NDA) binds the parties to keep confidential all private information, materials, and knowledge. An NDA may also be called a confidentiality agreement or a secrecy agreement. This type of legal contract keeps the parties from sharing valuable proprietary information with outside parties. An NDA is used often in business transactions involving intellectual property (IP), trade secrets, and similar information. It's a legally binding agreement on all individuals and businesses in possession of private information.
Mutual non-disclosure agreements are important tools to protect private information that might be devalued if disclosed. Some types of information cannot be protected by a mutual confidentiality agreement, including:
- Public information that is part of a public record or body of knowledge.
- Information that is not proprietary and therefore not in need of protection.
- Information that the receiving party already knew from other sources.
- Information that can be subpoenaed, that is part of a court order, or that is evidence in a case.
- Common knowledge in an industry that doesn't change.
You should also remember that an NDA cannot be used to protect you against illegal activity. If you are taking actions that are against the law, the agreement would be void. The NDA won't prevent another party from making a report to authorities.
To decide if the information you are protecting is proprietary, consider:
- Whether or not the information is generally known.
- If the information gives an advantage to the business that owns it.
- If reasonable efforts are taken to keep the information private.
It's important to note that an NDA is a mutual agreement, so neither party can disclose private information as opposed to binding just one party. Some forms of confidentiality agreements are one directional, binding on just one party, but those are not mutual agreements. One-way agreements give more flexibility to the party disclosing the information, while mutual business agreements provide more equal protection.
An NDA should include a clause that describes the possible repercussions of unauthorized sharing of information. For example, the clause might describe who pays the legal expenses if court proceedings are necessary for violations of the agreement.
If part of a mutual business agreement involves sharing private information like contact lists, trade secrets, business knowledge, and lists of suppliers, a nondisclosure clause may be added to the language. The nondisclosure portion of the contract should include:
- What information is to be kept confidential.
- Who can access that information and for what purposes.
- What happens to the information when the agreement ends.
- The penalties of disclosure, either intentional or by mistake.
Sometimes the parties might want to include a mutual release clause if the circumstances call for it. This is essentially just an agreement not to sue each other. A release clause usually includes what kind of issues the parties agree not to sue over and what kind might be appropriate for court proceedings. As an example, the parties might agree not to sue each other over third-party claims but to allow some legal action for breaches of the mutual business agreement.
If you need help with developing a mutual business agreement, you can post your legal need on UpCounsel's marketplace. UpCounsel accepts only the top 5 percent of lawyers to its site. Lawyers on UpCounsel come from law schools such as Harvard Law and Yale Law and average 14 years of legal experience, including work with or on behalf of companies like Google, Menlo Ventures, and Airbnb.