Omnibus Contract

This type of contract may stipulate all involved parties' responsibilities and outline the various aspects of the relationship between all the parties. These contracts are legally binding and may outline the penalties that will be enforced if any party violates the terms of the agreement.

An omnibus agreement has some similarities to a Memorandum of Understanding, also known as an MOU. It can relate to a number of areas in business, such as:

  • Joint venture agreements
  • Partnership agreements
  • Loan contracts.

This type of agreement can set forth the terms of forming a general partnership. In this case, the agreement will contain several important provisions and articles. One of these is the recitals, which is an important section of an omnibus agreement used to form a partnership. The recitals section includes the agreement's general purpose, as well as the desires of all involved parties to begin a new business arrangement with one another. All involved parties should agree not to engage in any other business opportunities that could compete against the business activities of the partnership.

An omnibus agreement will also include definitions of key terms. Some examples of these key terms may include:

  • Sponsor
  • Partnership group
  • Group member
  • Affiliate.

Another important provision in the agreement relates to indemnification. This section should allow all involved parties to agree, severally and jointly, to hold harmless, agree to, and indemnify the partnership for a set amount of time. These parties should also agree to cover any losses that impact the partnership as a result of:

  • Violations
  • Claims
  • Investigations.

Any procedures that could impact the agreement's indemnification should also be clarified by all involved parties.

The word omnibus relates to or provides for many things at the same time. It can also mean including or containing multiple items. One of the most common purposes of this type of agreement is to confirm and memorialize an understanding of the terms of a joint business venture among multiple parties.

Business Opportunities

An omnibus agreement should also outline how the partners in a partnership or other business arrangement will handle other business opportunities. Most agreements include a provision that restricts any involved party from owning, investing in, or operating a competing business. This section may be titled “Restricted Business.”

Another related section refers to the exceptions, which should outline the method the involved parties will use to allow a partner to enter into an area of business that is defined as a restriction. A common method for dealing with exceptions to the restricted business clause is creating a conflicts committee.

Finally, an omnibus contract should include several miscellaneous sections with boilerplate provisions. Examples include:

  • Modification
  • Governing law
  • Severability
  • Assignment
  • Notice
  • Termination.

The parties involved in an omnibus agreement may choose to include additional sections, depending on the type of relationship being established. You may want to include an agreement that no involved party will create an enterprise that competes at any point in the future. As soon as the parties create and sign an omnibus agreement, it is then a document that is legally binding, and all terms are enforceable.

If one of the parties fails to meet or violates a stipulation outlined in the agreement, the other(s) may use the document as evidence when taking legal action to recover their losses. Since an omnibus contract does carry some weight, it should be drafted and executed in correct and specific language. The legality of this agreement often necessitates the use of an experienced business attorney. Many companies choose to hire attorneys to draft and execute their contracts to make sure they contain the required information.

What Is an Omnibus Clause?

Even if you're not in a partnership, you may be familiar with an omnibus clause as it is commonly used in a business auto insurance policy. If you have this type of policy, you will find the clause under the Auto Liability Clause, Who is An Insured, which is usually in section two. An omnibus clause in this application eliminates the need to endorse additional insured individuals under an auto insurance policy for a commercial client.

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