As the novel coronavirus spreads around the world, a chaotic market for N95/KN95 masks, Personal Protective Equipment (“PPE”) such as gloves, thermometers, ventilators, hospital beds, testing kits, hazmat suits, hand sanitizer, goggles and other desperately sought-after medical supplies vital to the fight against COVID-19 has sprung up.

 

Numerous brokers or businesses around the world have joined the gold rush for this year’s most sought-after commodities. Urgent late-night inspections at mask factories, hurried million-dollar wire transfers to secure PPEs, and more. In this frenzied, pandemic-driven market, many different types of commercial agreements are involved. Entrepreneurs in international commodity trading, especially bulk commodities, often come across documents like Non-circumvention, Non-disclosure Agreements (“NCNDA”), International Master Fee Protection Agreement (“IMFPA”), Commission Agreements, and other documents. However, the legitimacy and protection these documents afford are yet to be determined.

 

What are NCNDAs and Why You Should Consult an Attorney Before Signing One

 

An NCNDA is an agreement that is commonly used in the preliminary stages of a business transaction where the seller and buyer do not know each other but are brought into contact with each other by one or more intermediaries or brokers to fulfill the transaction. The purpose of such agreement is to ensure that (1) the intermediaries or brokers who brought the buyer and seller together are not by-passed and (2) the information disclosed during the negotiations is not revealed to any external or unauthorized party. These agreements are usually valid for a specified term.

 

In this frenzied market, as the manufacturers making these desperately sought-after medical supplies are making huge profits by supplying bulk commodities to whoever can pay the most and pay fastest, a strong and well-drafted NCNDA is vital to anyone involved in these deals to protect their interests and ensure that they are not circumvented.

 

Some key terms of an NCNDA include:

  1. Non-Circumvention Clause, which is used to prevent the contracting parties from cutting each other on any businesses covered in the agreement. A clear definition of the covered business is critical.
  2. Non-Disclosure Clause, which aims to protect any information the contracting parties intend to be held confidential. A good NCNDA will need clear language to ensure important information that the party wants to prevent from disclosure are covered.
  3. Term, which defines how long the NCNDA will run.

 

Navigating this chaotic, “Wild West” PPE market can seem daunting. It is always helpful to enlist the assistance of a professional business attorney. At Carbon Law Group, with our extensive experience in providing legal guidance to businesses in contracting and negotiation, we are confident that we can serve as strong legal support for your business. Find out how Carbon Law Group can help you protect your intellectual property rights by scheduling a meeting with us using this link.

 

We can help with:

  • Reviewing Contracts
  • Drafting strong NDAs and Non-circumvent Agreements
  • Answering compliance questions
  • Due Diligence
  • Paymaster Services

A Master Services Agreement (MSA) is an agreement between the two parties to a service contract that details the expectations for both parties of their work together. MSAs are not project-specific contracts, instead, MSAs state the general agreement between the parties regarding all their work together. This means that the parties may use the same MSA with different project-specific Statement of Work (SOW) for each different future projects they have together. MSAs will allow the parties to negotiate future agreements efficiently, as they will only need to focus on negotiating the project-specific terms such as the scope of service, time of service and payment terms for each project. 

What is included in an MSA varies depending on the parties using the MSA, but it usually addresses: 

    • Dispute resolution policies if conflicts arise, including whether arbitration of mediation should be used. 
    • Jurisdiction is the law that will govern the agreement.
    • Forum is the place where the hearing or meeting will take place.
    • Limits on warranty to address the agreement on the scope and coverage of the warranty.
    • Limits on liability to address who is the responsible party in the event of a lawsuit. 
    • Confidentiality to prevent the parties from sharing any confidential information with outside parties. 
    • Termination policies to address when and how the agreement may be terminated. 
    • Intellectual Property Rights, including decisions on how the parties want to handle the ownership and regulation of all copyright, trademark, patents, and trade secrets. 
    • Insurance, to address the parties’ agreement on how to handle all insurance coverage and expenses.
    • Taxes, to address how and who is responsible to pay the applicable taxes.
    • Indemnification, to address how the parties will compensate each other for losses caused by each party to the other, i.e. when a third-party sues.
    • Risk allocation, to address which party bears the risk at different stages of the transaction.
    • Force Majeure, to address the parties’ obligation and liability when things that are not within the control of the parties happens, such as issues that arise due to acts of God, flood, fire, earthquake, explosion, governmental actions and war.
    • Attorneys fees, and whether the parties bear their own costs or the loser pays.

Many small businesses use the same contract template for all clients rather than negotiating from scratch for each client before they begin work. A well-drafted MSA can serve as a good template for similar services a small business performs for different clients and reduce the chance of litigation between the parties. And by using the same MSA with different project-specific SOWs, businesses can save significant cost on drafting detailed, customized contracts from scratch every time for a new transaction. 

If you need help with your MSA, feel free to schedule a consultation with an attorney using this link or calling our office at 323.543.4453.

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