A tripartite agreement, or a tri-party agreement, is a contract that legally binds three separate parties. These agreements can be particularly useful when an organization expands its workforce on a global level. This can be done through subsidiaries or EOR services, where the three parties involved would be the employer, the employee, and the EOR service/subsidiary.
A tri-party agreement consists of the rights and obligations from the perspective of each party involved. It drafts the responsibilities of each party throughout the different phases of the business/transaction. The most important aspect of a tri-party agreement is the part where the legal consequences of a non-compliant activity are defined. Here, if one party becomes a defaulter of the agreement, the contract secures the rights and investments of the other two parties.
A tripartite agreement is one of the best ways to safeguard the interests of all three parties involved in a business transaction. However, you must identify when this sort of agreement is required.
If we put it in simple words, a tripartite agreement is needed when there are three parties grouped in a situation where each one of them has interests and liabilities. Here are a few examples where a tri-party agreement may be required.
Once you have decided that a tripartite agreement is the way to go, you must understand the contents of the agreement.
The detailed contents of a tripartite agreement heavily depend on the business/transaction you are dealing with. In terms of employment, the contract must include details like length of service(if any), clauses and grounds for termination, an indemnification clause, etc. However, below are the general items that must be included in a tri-party agreement.
Once you have understood what your tripartite agreement should include, you should familiarize yourself with how it should look.
Below are some samples/templates of real-life triparty agreements that should give you a fair idea of what these contracts should look like. Please note that a licensed lawyer should draft the actual contract under the right guidance.
Some of the advantages that a tri-party agreement brings to the table are
There are many situations where a tri-party agreement may not be absolutely required, but it is always good to have one in place to avoid a few risks. Some of the risk points that can come up by not having a tripartite agreement are
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