Please point me in the right direction. Background: Painted Images (PI) Jo, Madd

Question

Please point me in the right direction.

Background: Painted Images (PI)

Jo, Maddy, and Taylor are friends, business acquaintances, and residents of Maryland. Jo has been the project manager for twelve years for a construction company owned by a general contractor and developer. Maddy and Taylor have owned and operated a small, successful home rehab and “flipping” business for ten years.

After considering several business ventures, the group decided that a residential painting business would be a good fit for their professional experiences, skills and interests and agreed to pursue the possibility of launching a Maryland-based painting business named Painted Images.

The three hired a market analyst to research market trends and demands for the painting services industry and confirm whether Painted Images would likely be a viable business in their community. The market analysis showed there is an increased demand for homes services businesses in the region.   Consequently, the group decided to move forward with their idea to establish PI.

The group is committed to operating and marketing PI as a green business. Most paint contains high VOC (volatile organic compounds) that pollute the air, particularly indoor air. According to the Environmental Protection Agency, VOCs are considered one of the top five hazards to human health, arising primarily from interior paints and finishes. New environmental regulations and manufacturing techniques have led to the development of low-VOC and zero-VOC paints that are durable, cost-effective and less harmful to human and environmental health.

Jo, Maddy, and Taylor plan to purchase all paint and other supplies from Naturals, Inc. (Naturals), a mid-sized manufacturer of zero-VOC paint and chemical free paint supplies. The potential owners of PI are familiar with Naturals as each has purchased from Nautrals for their respective current businesses. PI plans to resell certain Naturals products to PI clients directly for painting jobs, and via internet sales.

PI will be headquartered in a business space in a local shopping center. The PI headquarters will include private business offices, a reception area, and conference meeting and planning space to which potential and existing customers will be invited to discuss proposals for painting jobs, paint products, and to complete contracts for painting jobs. The business space will be open to the public to collect information and inquire about PI services, examine paint displays, and view photos and exhibits from ongoing and past painting jobs.

The potential PI owners recently attended a start up business seminar sponsored by the local chapter of the Small Business Administration. Following the seminar, the owners held several meetings to define the nature and scope of the work to be done to prepare a clear plan for the start-up business. They realized this process requires time, thoughtful analysis, and clear guidelines as the owners have somewhat different priorities, interests and expectations.

They also recognized that they need for professional business consultants, such as BCA, to guide their start-up for PI. Consequently, the three have hired BCA to advise and guide them through the start-up process for PI.

Painted Images Owners

Jo: Jo wants an initial 30%-40% interest in PI, but wants to limit future capital commitment until the business is operating profitably. Jo wants the option to acquire others’ interests if they die or leave the business for any reason.   Also, Jo wants to take out money from the business, in the form of salary, benefits, expenses, or dividends, as appropriate, as soon as PI has a healthy net profit margin.

Jo is most concerned about liability and knows the other owners are trustworthy and ethical, but wants to limit personal liability in the business to no more than capital contribution. If possible, Jo wants Key Man Insurance for the owners so all will have protection if one owner can no longer contribute to business for any reason.

Jo prefers a strong managerial position to make decisions for day-to-day operations. Jo is willing to be involved in day-to-day business operations and wants to play a key role, along with the other owners, in establishing the structure, and the business environment and culture for PI.

Maddy: Maddy wants at least a 25% interest, and prefers to minimize additional investments to protect personal cash assets needed for other business investments. Maddy’s main goal is to realize a return on investment as quickly as possible.

Maddy wants to minimize personal liability, especially in the event of bankruptcy or death of any of the other owners.

Maddy wants to participate in long-term business decisions, but does not want to be involved in day-to-day business activities. Maddy prefers to hire a general manager to run the business, although is willing to consider having others manage the business.   

Taylor: Taylor is enthusiastic about the new business plans and trusts the others and respects their business expertise.

Taylor is willing to commit to an investment of 51% interest in PI, but is agreeable to a lesser interest. With a maximum interest of 51%, Taylor would want complete control over business operations. Even with a lesser investment, Taylor wants a strong managerial position and prefers owners with a minority interest to be silent in day-to-day management of PI.

Taylor wants to minimize personal liability.

senario

PI operations and systems will be entirely computerized, and the PI owners want to begin the process to develop the IT systems to be in place prior to opening of the business. They have had several meetings with Teri Lang, an IT consultant whom they know from prior business dealings to be a skilled and trustworthy expert. Teri has agreed to develop and direct installation of an appropriate system for PI.

The owners want to give full authority to Teri to evaluate and purchase the best computer systems, associated hardware, and software programs for the business. The PI owners recognize Teri as the authority in this matter and want Teri to represent them as their agent in this process.

The PI owners are unfamiliar with agency agreements, and know they need to ensure that their agreement with Teri will be validly and properly written. Thus, they have asked BCA to create a contract to reflect their agreement with Teri, so that Teri can begin the process of developing an IT system immediately.

Instructions: As you continue to be actively involved with the PI project, Pat and Gale direct you to draft an agency contract for PI.

The contract should represent the agreement between the PI owners and Teri Lang defining the agency relationship and Teri’s authority as agent.

Write a sample contract that reflects the principal-agency agreement between the PI owners and Teri Lang. The contract should be valid and enforceable, and include ONLY the following terms:

The sample contract should be simple, clear, direct, and not overly complex.

Explanation / Answer

I am providing you with typical headings of a vendor agreement and the same can be filled up accordingly by you. Using similar language, time frame, and authority can be mentioned.

Payment should be ideally in phases. Project initiation stage, 30% of total project cost can be paid and then another 30% can be paid when half the project is done and remaining 40% can be paid when the final hands off takes place.

The language used in legal documents such as service level agreements are pretty much standard and there is no need to change much in it. Before signing the document, it is a good practice to get the same vetted by a legal practitioner.

This Consultancy Agreement, hereon referred to as the “Agreement” is made and entered into on (mention appropriate date) (the “Effective Date”) by and between Painting Images with its principal place of business located at Maryland (the “Company”) and Teri Lang with its principal place of business located at Maryland (the “Consultant”) (hereinafter referred to individually as a “Party” and collectively as “the Parties”).

             WHEREAS, the Company is in the business of residential painting business;

             WHEREAS, the Consultant has expertise in the area of IT consultancy;

             WHEREAS, the Company desires to engage the Consultant to provide certain services in the area of Consultant’s expertise and the Consultant is willing to provide such services to the Company;

             NOW, THEREFORE, the Parties hereby agree as follows:

1.         Engagement and Services

Engagement. The Company hereby engages the Consultant to provide and perform the services set forth below hereto (the “Services”), and the Consultant hereby accepts the engagement.

Recognizing the requirements and scope of the Company

Developing a plan of action including time scale and resources required

Understanding the practices and nature of Company

Monitor the computer systems and networks in the Company

Liaising with software engineers and IT support members

Analyzing potential issues and presenting written or oral solutions

Communicate in writing to understand the work that needs to be done

Be willing to travel across the country or even overseas

Standard of Services. All Services to be provided by Consultant shall be performed with promptness and diligence in a workmanlike manner and at a level of proficiency to be expected of a consultant with the background and experience that Consultant has represented it has. The Company shall provide such access to its information, property and personnel as may be reasonably required in order to permit the Consultant to perform the Services.

Representation and Warranty. Consultant represents and warrants to the Company that it is under no contractual or other restrictions or obligations which are inconsistent with the execution of this Agreement or which will interfere with the performance of the Services.

Termination. This Agreement may be terminated by the Company, without cause and without liability, by giving 30 calendar days written notice of such termination to the Consultant. This Agreement may be terminated by either Party by giving 30 calendar days written notice of such termination to the other Party in the event of a material breach by the other Party.

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