Agreement Between Two Companies Template for England and Wales

Under English law, a contract between two companies requires offer, acceptance, consideration, and an intention to create legal relations. It must be signed by a person with authority to bind each company, whether a director, company secretary, or a person with express or apparent authority granted by the board. Where execution as a deed is required (for example for guarantees or transfers of interests in land), section 44 of the Companies Act 2006 applies, requiring two authorised signatories or a director and the company seal.

Key provisions include: the identity and registered details of both companies, a clear description of the goods or services to be provided, the price and payment terms, the duration and termination rights, liability and indemnity provisions, confidentiality obligations, intellectual property ownership, the governing law and jurisdiction, and a dispute resolution clause. Clear drafting of each party's obligations and remedies for breach reduces the risk of disputes and costly litigation between the parties.

Yes, subject to the Unfair Contract Terms Act 1977. A company may limit or exclude liability for breach of contract between commercial parties, but any exclusion clause must satisfy the reasonableness test. Liability for death or personal injury caused by negligence cannot be excluded at all. Exclusion of liability for other forms of negligence and for breach of express contractual terms must be reasonable having regard to the parties' bargaining power, insurance arrangements, and the commercial context.

Under section 177 of the Companies Act 2006, a director who has a direct or indirect interest in a proposed transaction with the company must declare that interest to the other directors before the company enters the agreement. Failure to declare is a criminal offence under the Act. Where the agreement is between two companies with shared directors, the conflict of interest must be properly managed and documented in board minutes before execution.

The agreement should specify payment terms, the method of payment, and interest on late payment. Under the Late Payment of Commercial Debts (Interest) Act 1998, statutory interest of 8% above the Bank of England base rate accrues automatically from the day after the payment due date unless a substantial contractual remedy is agreed. Including a contractual interest rate and debt recovery cost clause provides the creditor with additional protection beyond the statutory minimum.

Under the Competition Act 1998, agreements between companies that fix prices, share markets, limit production, or otherwise restrict competition may infringe the Chapter I prohibition and be void. Exclusivity provisions, non-compete clauses, and information sharing arrangements require careful drafting to remain within the safe harbours provided by the UK Vertical Agreements Block Exemption Order 2022 or other applicable block exemptions issued by the CMA.

The agreement should address ownership of any IP created in the performance of the contract, whether background IP is licensed and on what terms, and who retains IP on termination. Where one company develops IP using the other's confidential information or specifications, an express assignment or licence is required. Absent an assignment, the company that creates the work will own it under the Copyright, Designs and Patents Act 1988 as the author.

A tiered clause requiring escalation to senior management, then mediation, and finally court proceedings in England and Wales is standard for most commercial contracts. Where the agreement is high-value or involves complex technical disputes, binding arbitration (for example under LCIA rules) offers greater confidentiality and finality. English courts will enforce both mediation obligations and arbitration clauses where they are clearly drafted.