Teaming Agreement: Enforceable Contract or Unenforceable Agreement to Agree?

October 2015

Teaming agreements have become common and crucial contracts that seemingly bind contractors and subcontractors during the bidding process. These agreements are intended to help assure the bidding team, that all members will fulfill their reciprocal commitments should the team's bid proposal be accepted.

The problem, however, is that basic contract law often treats these agreements as unenforceable "agreements to agree"—i.e., the parties agree that if, in the future, the bid proposal is accepted, then at that time the parties will negotiate the terms regarding the work to be performed. Contractors and subcontractors are thus placed in the unenviable position of needing an agreement that is frequently worth no more than the paper it is written on. This was the case in Cyberlock Consulting, Inc. v. Info. Experts, Inc., 939 F. Supp. 2d 572, 580 (E.D. Va. 2013), which held that a teaming agreement "constitute[s] an unenforceable agreement to agree." However, Cable & Computer Tech. Inc. v. Lockheed Sanders, Inc., 214 F.3d 1030, 1035 (9th Cir. 2000) held that an oral teaming agreement could be found enforceable where there was evidence of "an exchange of promises, supported by consideration, to be a team . . . and as a team submit a bid."

The likelihood that these agreements will be found enforceable by a court can be increased by crafting them to include specific and definable terms and commitments by all parties to the agreement, relating to matters like duration, bidding obligations, and competition among team members. Indeed, that an enforceable teaming agreement can be incredibly valuable in Missouri—was shown in J.M. Neil & Associates, Inc. v. Alexander Robert William, Inc., 362 S. W. 3d 21, 25-26 (Mo. Ct. App. 2012), which affirmed jury award in a team member's favor for punitive damages when the other team member breached a teaming agreement's covenant not to compete.

Contractors and subcontractors should consult an attorney on how best to draft their teaming agreements in order to maximize the likelihood of enforceability. If a prospective teammate puts forward a teaming agreement, parties should postpone signing it until conferring with legal counsel to determine whether the agreement could later be declared legally meaningless as a mere unenforceable "agreement to agree."