Almost every association, at some point, seeks assistance from outside consultants or providers of products and services. That work, and the agreed-upon payment for it, is formalized in a written contract.

While all contractual language is important, termination and intellectual property ownership become very important when considering how a contract can be ended and who gets what. Seek to avoid surprises. To do so, engage in careful drafting and keen contract negotiations.

Termination

Imagine your association is in month six of a three year-vendor contract, and things are not going well. You head to legal to ask for advice on how to terminate. This is likely the most common question an in-house attorney is asked about an existing agreement. When a contract terminates and what happens upon termination are of huge significance, so talk with your legal counsel about your organization's termination needs before signing any agreement.

When an agreement lacks appropriate termination language, a variety of problems can arise. For example:

No provision for early termination, other than for cause or breach. This is obviously a good thing if you are the party that wants the agreement to continue for years, but it is problematic if you want to terminate. Convincing the other party that they breached the contract can be difficult and sometimes requires involving a third party. If the only basis on which to terminate is breach or cause, you have contract terms that are akin to no early termination.

Successful negotiations involve, among other things, clever wordsmithing, finesse, confidence, and strategy.

Automatic renewal. You also will have difficulty ending an agreement if the contract allows termination only after a set number of years and the agreement automatically renews every year.

Payment requirement. Another possibility is that you can terminate early, but doing so requires paying for all contracted services through the life of the agreement, regardless of whether they are needed.

No provision for what happens upon termination. In this scenario, the agreement allows early termination, but it does not include language to address practical matters like transfer of data, ownership of intellectual property, or whether the departing contractor will provide assistance to facilitate the transition to a new vendor.

In drafting a vendor agreement, seek to include terms that fit with how your organization would like to terminate. If you want the flexibility to terminate at any time, consider including language that allows termination for "any reason or no reason." Finally, include language that addresses your organization's needs upon and after termination.

Intellectual Property

It is also critical to include language in an agreement that addresses intellectual property rights—yours and the vendor's. For example, if your association hired a company to create a logo that will appear in a national marketing campaign, who owns it? If the contract is silent on the issue, copyright law will need to be examined to determine ownership.

A first step when entering into an agreement is to know whether the vendor will create anything for you (photos, audio, forms, reports, toolkits, apps, software, articles, surveys, and so on) and whether your association would like to own or have a license to this work. Once you know what will be created, you can negotiate suitable intellectual property language.

Smart Negotiations

Securing appropriate termination and intellectual property language will likely require some negotiation. Successful negotiations involve, among other things, clever wordsmithing, finesse, confidence, and strategy.

Every agreement is different, and what works in one situation may not work in another. However, these tips can usually help secure language that will best meet your organization's needs:

• Have your counsel write the first draft of the agreement.
• Expect and prepare to go through more than one round of negotiations.
• Do not be afraid to ask for what you want.
• If a negotiation is not moving in your direction, point out that your association has generously agreed to terms that it does not like.
• Offer to accept one term in exchange for inclusion or deletion of another term.
• Provide compelling reasons, such as legal requirements or core association policy, as to why certain terms must be included or excluded.

The bottom line: The more brainpower that your organization applies in its approach to vendor contracts—particularly regarding how to terminate, secure rights, and negotiate—the stronger its business foundation will be.