If you are a freelance manager, management consulting firm, or agency, it is crucial to have a well-documented management agreement in place. This article aims to provide you with an optimized understanding of a management agreement and guide you through its essential components. By using our management agreement templates, you can simplify the process and tailor the template to your specific needs.
A Management Agreement is a legally binding document between two parties that outlines the crucial aspects of required managerial functions. It establishes the scope of managerial duties, including the expected duration, payment terms, and any potential modifications or cancellations. It is essential to establish these details before the manager's role begins to ensure clarity and alignment between both parties.
There are various types of management agreements available, and you should select the one most suitable for your business. Business in a Box offers a wide range of management agreement templates, including property management agreement, management services agreement, management and administrative services agreement, branch management agreement (to establish & manage), vendor management policy, IT systems & HR management services agreement, and more.
A management agreement typically includes clauses similar to other business agreements, such as identifying the parties involved, start date and duration of the agreement, choice of law, dispute resolution, remedies for agreement violation, legal cost obligations, prohibition on oral amendments, and more. It should also address specific topics, such as the products or services to be delivered, payment terms, service location, and termination conditions.
To protect confidential information, a confidentiality and nondisclosure clause is often included, ensuring that sensitive company information remains undisclosed to competitors or the public.
To ensure a successful management agreement, it is important to follow these best practices:
The Company hires the Manager to have experience in the running of the Business as well as other management services the Company may need periodically. These services shall be delivered by the Manager and by other such representatives and supervisors the Manager can appoint.
In this part of the Management Agreement, the terms of the agreement are laid out for both parties to read and observe so that no disputes will arise at a later date. The agreed terms of the Management Agreement will be in effect for a specified number of months from the date of the Company's opening for business unless the agreement is discontinued or later continued in compliance with the terms and conditions of the present Management.
When the current agreed terms of the agreement come to an end, the two parties can then choose to discuss terms for renewal of the agreement as well. The two parties can choose to make changes to their previously agreed terms, or if the terms are deemed to be adequate for both parties, the Management Agreement can simply be renewed for another specified length of time on the current terms.
During the length of this Management Agreement, the Company has to pay to the Manager a fee for its management services equivalent to a percentage of the Business's Gross Sales. This is also known as the Management Fee.
The Management Fee must therefore be payable monthly in arrears. The Manager shall be compensated for all legitimate and necessary travel and other related costs in accordance with its duties under this agreement. The Manager shall provide the Company with statements and coupons on any costs on which compensation is sought.
During the length of the current Management Agreement, the Manager shall have absolute control and jurisdiction to administer the Business on behalf of the Company.
The Manager's jurisdiction, rights, roles, and obligations to the Company under this Agreement are quite comprehensive. Here is a detailed breakdown of all of the different things a manager can be involved in.
The management agreement also highlights some instances and clauses where the agreement is said to have been terminated. These conditions are important as they can protect both parties from significant legal ramifications and limit their liability in certain instances. If the conditions laid out in the agreement are breached, the agreement can be considered null and void.
The existence of any of the following occurrences shall be considered to be a breach of Management Agreements by a Company.
The purpose of this section within the Management Agreement is to ensure the Parties understand, accept, and recognize that this Agreement does not establish any fiduciary relationship between them and that nothing in this Management Agreement is intended to make either party a partner or joint venturer of the other or to build any commercial or other arrangements between the Parties.
The Company agrees to keep the Manager free against any responsibility arising from any arrangement entered into with a third party within the limits of Manager's jurisdiction and powers under this agreement and to compensate the Manager for any expenses incurred in conjunction with those contracts.
The Company, therefore, agrees to indemnify and leave free the Manager against every application for any relief whatsoever brought by any party arising out of any behaviour or negligence of the Manager or any person operating within its control, whether or not the claim is well-founded.
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