Management and Services Agreements

Management and Services Agreements must specify which decisions the service provider may make independently and which require owner approval. Vague authority provisions often result in operational overreach or paralysis. Precision in defining scope protects both parties from conflicting expectations and liability claims.

When management authority is broadly granted, courts may view service providers as agents rather than independent contractors. Management and Services Agreements must be structured to reflect intended relationships. Failure to do so may expose principals to liability for acts they did not directly authorize.

Management fees may be fixed, variable, or performance based. Management and Services Agreements must clearly define calculation methods and benchmarks. Ambiguity in performance metrics frequently leads to disputes over entitlement and timing of payment.

Service providers often incur expenses on behalf of the business. Management and Services Agreements should delineate reimbursable costs and approval processes. Poorly defined expense provisions can inflate costs and erode trust between parties.

Businesses remain accountable for compliance even when management functions are delegated. Management and Services Agreements must allocate compliance responsibilities clearly. Ambiguity may result in enforcement actions against the principal rather than the service provider.

Management arrangements can implicate employment law issues, particularly where service providers direct personnel. Management and Services Agreements should address supervision, hiring authority, and labor compliance to avoid misclassification or joint employer exposure.

Indemnification clauses allocate responsibility for third party claims and internal losses. Management and Services Agreements must balance protection with enforceability. Overly broad provisions may be challenged, while narrow clauses may leave critical exposure unaddressed.

Insurance provisions support risk allocation but only if aligned with actual exposure. Management and Services Agreements should specify coverage types, limits, and additional insured status. Misalignment between contractual requirements and available coverage often undermines risk mitigation.

Agreements must define when termination is permitted and how transitions are managed. Management and Services Agreements that lack clear transition obligations risk operational disruption. Planning for orderly disengagement preserves business stability.

Post termination obligations such as confidentiality and non solicitation may survive the relationship. Management and Services Agreements should also address residual authority to prevent continued reliance by third parties. Failure to manage post termination effects can extend liability beyond the intended term.