Negotiated Risk Agreement Example

A negotiated risk agreement (NRA) is a written contract between two parties that outlines the potential risks and responsibilities associated with a particular transaction or activity. This type of agreement is commonly used in business and can help protect both parties from potential legal disputes.

Here is an example of how an NRA might be used in a business setting:

John owns a small construction company and has been hired by Sarah to build a new addition onto her home. Before beginning the project, the two parties sit down and discuss the potential risks associated with the project, such as delays in construction due to weather or unforeseen complications that may arise during the construction process.

After discussing the risks, the two parties decide to create an NRA to outline the responsibilities of each party in the event that any of these risks do occur. The NRA includes the following clauses:

-Delay Clause: If construction is delayed due to weather or other unforeseeable circumstances, Sarah will not hold John responsible for these delays and will not seek damages from him.

-Complication Clause: If any unforeseen complications arise during the construction process, John will immediately notify Sarah and work with her to find a solution. If the complication causes additional costs, the two parties will negotiate a reasonable price for any necessary changes to the project.

-Completion Clause: John agrees to complete the project within the agreed-upon timeline. If he fails to do so without a valid reason, Sarah has the right to terminate the contract and seek damages for any additional costs incurred.

By creating an NRA in advance, both parties have a clear understanding of their responsibilities in the event that any of these risks occur. This can help prevent potential legal disputes and create a more cooperative working relationship between the two parties.

In conclusion, an NRA is a valuable tool for businesses to protect themselves from potential legal disputes. By outlining responsibilities and potential risks in advance, both parties can work together to complete a project or transaction with a greater sense of security and trust. Whether you`re a small business owner or a large corporation, creating an NRA can help ensure a successful outcome for any transaction or project you undertake.