What to include in a collaboration agreement — clause by clause

A counterparty has sent you a draft collaboration agreement, or you are about to send one. Either way, you are probably looking at a document that is longer than a handshake and shorter than a joint venture deed — and you want to know whether what is in it will actually protect you when things get difficult.

A collaboration agreement is the operative contract for a defined joint project between two or more independent parties. It is not a merger, a partnership, or a shareholders agreement. Its job is to answer, in writing, every question that would otherwise be left to assumptions: who does what, who owns what comes out of it, how money moves, and what happens if someone wants to leave. It does not create a new legal entity, but it can be the document that decides the outcome of any dispute that arises from the work.

Scope and objectives clause

This is where the project is defined — and where the most expensive ambiguity usually lives.

A well-drafted scope clause sets out:

The specific project, product, or campaign being undertaken
What is expressly excluded from the collaboration
The key milestones and the timeline
The measurable deliverables that signal completion

The drafting choice that matters most is precision over brevity. Parties often write a vague scope to avoid the discomfort of negotiating the edges upfront. That discomfort is cheaper than a dispute about whether a second phase was part of the deal.

Trap: A scope that defines what you are doing but not what you are not doing. If one party later claims that a related activity was within scope, a clause that only describes inclusions gives you nothing to point to.

Roles, responsibilities, and decision-making

A collaboration only works if each party knows what they are responsible for and who can bind the project to a decision.

Cover at minimum:

Which party leads which workstream
The process for day-to-day decisions (one party can act without consent)
The decisions that require mutual consent — budget variations, engaging subcontractors, public statements
How meetings are convened and what constitutes a quorum
What happens if the parties cannot agree on a material decision

Drafting minimum: Identify one named representative for each party who is authorised to make day-to-day decisions. Without this, you will face delays every time a question arises.

Trap: Treating all decisions as requiring mutual consent. In practice, this stalls the project. Reserve mutual consent for genuinely strategic matters and define what those are.

Intellectual property ownership

IP is where collaboration agreements most often fail — not at the start, but when the project ends and one party wants to use what was built.

There are two distinct categories to address:

Background IP is the IP each party brings into the project — existing software, creative assets, trade marks, methodologies, data. Each party should retain ownership of their background IP. The agreement should grant the other party only the licence needed to carry out the project, on terms that end when the project does.

Project IP is the new IP created during the collaboration. The options are:

Joint ownership (each party owns an undivided share and can use it without accounting to the other — confirm this is what you want)
Assignment to one party with a licence back to the other
Ownership split by category (one party owns the code, the other owns the brand)

For creative work, the agreement should also deal with moral rights under the Copyright Act 1968 (Cth). Moral rights cannot be assigned, but creators can consent to acts that would otherwise infringe them — get that consent in writing.

Trap: Assuming that because an employee of yours created something during the collaboration, your business owns it. Ownership of employee-created work under the Copyright Act 1968 (Cth) depends on whether creation was in the course of employment — and if contractors are involved, the default position is that the contractor retains ownership unless there is a written assignment.

Financial model and payment mechanics

Ambiguity about money is the most direct route to a breakdown in the commercial relationship.

The financial clause should address:

How shared costs are budgeted and who can approve variations
Which party invoices clients, collects revenue, and holds funds
How revenue and profit are split, and on what calculation basis
When distributions or reimbursements are made
What happens if a payment is missed — interest, suspension of obligations, termination rights
A simple reconciliation process and the records each party must keep

Drafting choice: Set out the financial model in a schedule rather than the body of the agreement. This makes it easier to update if the project changes scope without reopening the entire contract.

Trap: Revenue-sharing without a defined calculation. "We split profit 50/50" is not a clause — it is the beginning of an argument about what counts as a cost before the split.

Confidentiality

Each party will share information during the project that they would not want disclosed to competitors or the public. The confidentiality clause governs what can be shared, with whom, and for how long.

Key elements:

A definition of confidential information (specific is better than "all information exchanged")
Permitted disclosures — professional advisers, employees who need to know, disclosures required by law
Obligations on the receiving party: not to disclose, not to use for any purpose outside the project
What happens to confidential information on termination — return, destruction, or certified deletion
The survival period after the agreement ends (commonly two to five years)

If you are sharing sensitive information before the main agreement is signed — during due diligence or commercial negotiations — use a standalone non-disclosure agreement first. A confidentiality clause in the collaboration agreement does not protect information you shared before it was signed.

Trap: A confidentiality clause that excludes "publicly available information" without specifying that information does not become public merely because one party disclosed it in breach. Define the exclusion tightly.

Australian Consumer Law compliance and warranties

If the collaboration sells goods or services to consumers, both parties take on obligations under the Australian Consumer Law (Competition and Consumer Act 2010 (Cth), Sch 2). Section 18 prohibits misleading or deceptive conduct in trade or commerce — and that prohibition applies to each party's conduct, regardless of what the collaboration agreement says between you.

The agreement should:

Require each party to warrant that its conduct and representations comply with the ACL
Set out which party is responsible for consumer-facing claims, marketing materials, and product descriptions
Allocate liability and indemnity if one party's ACL breach causes loss to the other

Drafting note: Consumer guarantees under the ACL cannot be excluded or limited by contract as against consumers. Ensure your agreement does not attempt this — it will not work, and it creates a misleading impression about consumers' rights.

Liability, indemnity, and insurance

This clause determines who bears the financial cost when something goes wrong.

Standard approach:

A mutual cap on liability (often linked to the fees paid under the agreement or to an agreed dollar figure)
Exclusion of liability for consequential or indirect loss (lost profits, loss of opportunity) — subject to negotiation
Mutual indemnities for each party's own negligence or breach
A requirement that each party hold specified insurance and provide evidence on request

Variant the other side will push for: Carving out their own liability cap for breaches of the IP or confidentiality clauses. This is commercially reasonable — IP and confidentiality breaches can cause losses far beyond the contract value, and a general cap would not adequately cover them.

Trap: A liability clause that is silent on consequential loss. In the absence of an express exclusion, consequential loss can be claimed under Australian contract law. If you do not want to be exposed to it, you must say so explicitly.

Dispute resolution

Disputes in collaborations tend to escalate faster than in other contracts because the parties are in active, ongoing contact when the problem arises.

A tiered process works best:

Written notice to the other party identifying the dispute
Senior representatives of each party meeting within a set period (commonly 10–15 business days) to negotiate in good faith
If unresolved, mediation through an agreed body before either party may commence litigation
Governing law and jurisdiction clause specifying which Australian state's courts apply

Drafting choice: Name the governing law explicitly. For collaborations where the parties are in different states, this avoids a satellite argument about which state's law applies.

Trap: A dispute clause that only requires negotiation before litigation, with no mediation step. Mediation is significantly cheaper than court and resolves the majority of commercial disputes — omitting it removes a useful off-ramp.

Termination and exit

Every collaboration eventually ends — ideally by completion, sometimes by mutual agreement, occasionally by one party exercising a termination right. The exit mechanics determine who gets what when it does.

Address:

Termination for convenience (either party, on notice — set the notice period deliberately)
Termination for cause (material breach, insolvency, a party's inability to perform)
Handover obligations on termination — what must be delivered to whom, by when
How project IP is dealt with on exit
Whether the outgoing party receives any payment for work completed to date

Optional and situational clauses worth considering

Exclusivity: If the collaboration is to be the parties' sole vehicle for a defined activity during the project, an exclusivity clause prevents a party from running parallel arrangements with competitors. Include only if this is a genuine commercial need — it significantly constrains both sides.
Step-in rights: Where one party's failure to perform would stall the entire project, a step-in right allows the other party to take over that obligation (at cost) rather than having to terminate. Common in project delivery or construction-adjacent arrangements.
Restraint of trade: If the project gives one party access to the other's clients, methods, or data, a limited post-termination restraint may be warranted. Keep it proportionate — Australian courts will not enforce a restraint that is wider than reasonably necessary to protect a legitimate interest.
Franchising carve-out: If the model involves granting another party the right to operate under your brand and system, that may trigger the Competition and Consumer (Industry Codes — Franchising) Regulations 2024 (Cth). Get advice before the agreement is finalised.
Change of control: A clause providing that the agreement terminates or requires consent if a party is acquired. Particularly relevant where the collaboration was based on the specific identity or capabilities of the people behind the business.

Where Artificer Legal can help

Collaboration agreements look straightforward until you are looking at a clause that does not say what you thought it said. The clauses that cause the most problems in practice — IP ownership, the financial model, and liability — are also the ones most often drafted loosely to get the deal moving.

At Artificer Legal, we review collaboration agreements at the clause level, not just the headline terms. That means pushing back on vague scope definitions before they become scope disputes, restructuring IP clauses so that your background IP does not accidentally become project IP, and tightening liability caps so the exclusions actually hold up. We negotiate the financial model before the project starts, not after the first reconciliation argument.

If you are the party sending the first draft, we can build a document that is appropriately balanced — protective of your position without being so one-sided that it delays the deal. If you are the party reviewing a counterparty's draft, we can identify the provisions that shift risk onto you in ways that may not be obvious from a first read.

The earlier we are involved, the more options you have. Once the project has started and money has moved, unravelling a poorly drafted agreement becomes significantly harder.

The IP ownership clause needs defining before work starts

The IP ownership clause is the one most likely to determine the outcome of any dispute that survives into litigation — not because it is the most frequently breached, but because its effect is felt long after the collaboration ends, when one party wants to build on what was created and the other disagrees about who owns it.

The instinct is to leave IP for later, once the commercial relationship is established. That instinct is understandable and consistently expensive. Background IP and project IP need to be defined and allocated before work begins, because once work begins, the question of what was brought in and what was created becomes much harder to answer clearly.

To summarise the key points: a collaboration agreement governs the entire joint project — scope, roles, money, IP, risk, and exit. The clauses that matter most are the ones that deal with what happens when something goes wrong or when the project ends, and those are the ones most often drafted too loosely or left out entirely. Verify your IP position before you start. Define what happens on exit before you are trying to leave. Get the financial model in writing before the first invoice is raised.