Engineering Services Contract: Definition & Sample

The engineering services contract is a legal document that details both parties’ professional and financial obligations. This is also known as an "engineering design agreement." In addition, the contract will detail how parties are to be compensated, what type of work will be completed, and who has ownership over intellectual property rights.

It will also discuss when results should be delivered and other contractual points. But, again, it’s important to have one in place before starting any work with another party because it can prevent misunderstandings down the line.

Common Sections in Engineering Services Contracts

Below is a list of common sections included in Engineering Services Contracts. These sections are linked to the below sample agreement for you to explore.

Engineering Services Contract Sample

REQUESTED PURSUANT TO RULE 406

Technology License and Engineering Services Contract

Chongqing DAQO New Energy Co., LTD

Wanzhou Industrial Park

404000 Wanzhou, Chongqing P.R. China

Poly Engineering S.r.l

Via Galileo Ferraris 13

Monza / Milano Italy

Technology License and Engineering Services Contract

Contract No.: DJG-HT20080615

Date of Signature: June 15 th , 2008

Chongqing DAQO New Energy Co., LTD (“ Customer ” or “ DAQO ”), a limited liability company incorporated under the laws of the People’s Republic of China with the registered address at Wanzhou Industrial Park, Wanzhou, Chongqing, intends to erect a facility in the People’s Republic of China for the production of silicon polycrystal for use in the semiconductor and solar energy industry.

Poly Engineering S.r.l. (“ Contractor” or “PE ”) , a company incorporated under the laws of Italy with the registered address at Via Galileo Ferraris 13 Monza, Milano, has the know-how and experience for the erection of such facility for the production of silicon polycrystal for use in the semiconductor and solar energy industry. Thus, PE is in a position to provide DAQO with the respective know-how for the erection and operation of such plant and is, furthermore, in a position to supervise the respective construction as well as the start-up of the production.

Now, THEREFORE, the Parties agree as follows:

The following words and expressions will have the meaning specified here below:

(a) “ Applicable Law ” shall be understood to mean any and all local, regional, and national laws, regulations, ordinances, pronouncements, judicial decrees, and similar governmental declarations, which are applicable to a Party, this Contract, the subject of this Contract, or the design, construction and operation of the Plant.

(b) “ Basic Engineering Package (“ BEP ”)” shall be understood to mean the set of documents and services specified in Annex No.2.

(c) “ Contract ” shall be understood to mean the present Contract including its annexes.

(d) “ Confidential Information ” shall be understood to have the meaning given to it in Section 7.1.

(e) “ Contractor ” shall be understood to mean Poly Engineering S.r.l.

(f) “ Contractor Services ” shall be understood to have the meaning given to it in Section 4(B) of Annex No.2.

(g) “ Customer ” shall be understood to mean DAQO.

(h) “ Effective Date ” shall be understood to mean the date this Contract is signed by both Parties.

(i) “ Equipment ” shall be understood to mean any equipment necessary for implementation the process for the production of the Product.

(j) “ Including ,” whether or not capitalized, shall be understood to mean “including, but not limited to.”

(k) “ Intellectual Property Rights ” shall be understood to have the meaning given it in Section 6.2.

(1) “ Know-how ” shall be understood to mean all know-how, show-how, processes, designs, specifications, drawings, blue-prints, documentation, and confidential and proprietary information required to be provided, or provided, by Contractor to Customer under this Contract, including the BEP and CED, and any Intellectual Property Rights embodied in any of the foregoing.

(m) “ Parties ” shall be understood to mean the Customer and the Contractor.

(n) “ Plant ” shall be understood to mean a plant for the production of the Product using the Process and the Equipment; all as specified in more detail in Annex No. 2.

(o) “ Process ” shall be understood to mean all the technological operations necessary for the production of the Product based on the raw materials having the characteristics specified in Annex No. 1; all as specified in more detail in Annex No. 2.

(p) “ Product ” shall be understood to mean silicon polycrystal (“ SP ”) having the characteristics specified in Annex No.2.

(q) “ Project Start ” is defined as the moment, when the down payment has been paid by DAQO; all schedules and times in Section 6 of Annex No.2 are measured from Project Start.

(r) “ Services ” shall be understood to have the meaning set forth in Section 3.1 of this Contract.

2.1 Contractor hereby grants to Customer a perpetual, irrevocable, fully paid and royalty free license to use, reproduce, modify, prepare derivatives works of, and otherwise practice and exploit the Know-how:

2.2 The license granted hereabove includes the right to sublicense the rights enunciated to affiliates of Customer without Contractor’s approval. Customer may sublicense such rights to one or more unaffiliated third parties only with Contractor’s prior approval which shall be not unreasonably withheld

2.3 The license granted to the Customer according to Section 2.1 is exclusive for the territory of the People’s Republic of China including the Special Administrative Regions of Hong Kong and Macau and Taiwan (“Exclusive Territory”) until December 31, 2011 (the “Exclusivity Period”).

Contractor, Mr. Marangoni and Mr. Ragaini, will not, and will cause any affiliate of Contractor, Mr. Marangoni or Mr. Ragaini not to, directly or indirectly, through any representative or otherwise, solicit or entertain offers from, negotiate with or in any manner encourage, discuss, accept, or consider any proposal of any person or execute any contract relating to the transfer of the Know-how to the Exclusive Territory, in whole or in part (including but not limited to the installation of (in whole or in part) a production plant for polycrystal silicon in the Exclusive Territory), whether directly or indirectly, through sale, merger, consolidation, or otherwise.

Furthermore during the Exclusivity Period, for all contracts of Contractor, Mr. Marangoni or Mr. Ragaini or any affiliate of Contractor, Mr. Marangoni and/or Mr. Ragaini for the transfer of the Basic Engineering to places outside the Exclusive Territory, Contractor, Mr. Marangoni and Mr. Ragaini will apply contracts where the customer is not allowed to transfer the Basic Engineering and its plant to the Exclusive Territory; in particular, but not limited to, Contractor, Mr. Marangoni and Mr. Ragaini will insert and will cause any affiliate of Contractor, Mr. Marangoni and/or Mr. Ragaini to insert appropriate wording (i) expressly prohibiting such transfer of the Basic Engineering to the Exclusive Territory as set forth above and (ii) requiring any contractor to insert such wording in its respective contracts.

3.1 The Contractor shall perform the functions and tasks specified, or referred to, in this Section 3.1 as well as any functions and tasks not specifically named but reasonably required to perform the functions and tasks specified, or referred to, in this Section 3.1 (the “ Services ”).

(a) Contractor shall transfer to the Customer the Know-how and submit to the Customer the associated technical documentation, and perform the services, specified in Annex No, 2.

(b) Contractor shall provide to the Customer the BEP, perform the Construction Services, and submit to the Customer the associated technical documentation as specified in Annex No. 2.

(c) Notwithstanding anything to the contrary herein, and without limiting Contractor’s obligations as otherwise set forth in this Contract, at Customer’s request Contractor shall, as part of the Services, provide at Customer’s site an appropriate number of suitably qualified and experienced engineers to advise Customer during construction, commissioning, start-up, and testing of the Plant, and supply training services to Customer and Customer’s designees.

3.2 The Contractor shall perform the Services in accordance with the timeline set forth in Section 6 of Annex 2.

3.3 Customer may propose a change to be made to the Services or the BEP. In such event, Contractor shall promptly prepare a written analysis of the change including the rationale for and consequences of the change. Such consequences shall not include any changes to the Total Remuneration unless the implementation of the change requires material additional resources or efforts on the part of Contractor. If upon receipt and review of Contractor’s analysis, Customer is interested in further considering such change, Contractor shall develop for Customer to review and approve a detailed implementation plan. With Customer approval, Contractor shall implement the change in accordance with such plan.

4. Remuneration and terms of payment

4.1 The Customer should pay to the Contractor according to the payment schedule. The total remuneration for the Know How, the BEP , the Construction Services and the exclusive fee consists of four parts:

Part 1: payment for 2008 is * * *

Part 2: payment for 2009: * * *

Part 3: payment for 2010: * * *

Part 4: payment for 2011: * * *

4.2 Customer’s payments will be due pursuant to the following time schedule:

100% of the payment for 2009 within the first three months of the year 2010

100% of the payment for 2010 within the first three months of the year 2011

100% of the payment for 2011 within the first three months of the year 2012

4.3 All taxes and duties to be paid by the Customer in the territory of the People’s Republic of China shall be borne by the Customer and all other taxes and duties shall be borne by the Contractor.

4.4 Each Party shall be solely responsible for all expenses and the costs of all resources, including all software, hardware, personnel, and travel expenses, used in performing its obligations under this Contract unless otherwise specified herein.

5. Procedure for acceptance of documentation

5.1 All documentation will be delivered to Customer in English and in electronic format as specified in Annex No. 2.

5.2 Customer is not obliged to inspect the documentation upon receipt.

6. Representation and warranties

6.1 The Contractor represents and warrants that the Know-How and the BEP are correct, complete, adequate and without defects and will enable the Customer to erect and operate the Plant for the production of the Product in compliance with Applicable Law. The Contractor represents that it will perform the Services in a professional and workmanlike manner in accordance with widely recognized professional standards in the civil engineering industry.

6.2 The Contractor represents and warrants that it has the right to grant Customer the licenses under Section 2 of this Contract and that Customer’s exercise of such licenses in accordance with the terms of this Contract will not infringe, misappropriate or otherwise violate the patents, copyrights, trade secret rights or other intellectual property rights (collectively, “Intellectual Property Rights” of any third party.

6.3 In case of any violation of the Contractor’s representations or warranties set forth in this Section 6, the Customer will notify the Contractor in writing. The Contractor will, within a reasonable time (but no later than three weeks after receipt of Customer’s notification) remedy such violation accordingly or explain why it believes that there has not been a violation of a representation or warranty. In the event that the Contractor fails to remedy the notified violation within a reasonable time (but no later than three weeks after receipt of Customer’s notification) or if Customer determines that any delay caused by such violation is not acceptable, Customer may – in its sole discretion – engage a third party to remedy such violation; all costs and expenses of such third party will be borne by the Contractor. The Customer’s right to claim additional remedies pursuant to this Contract or the provisions of Applicable Law remains unaffected.

7.1 Each Party will keep confidential all non-public information belonging to the other Party and clearly marked “CONFIDENTIAL” or “PROPRIETARY” by such Party, as well as all such information that, by reason of its nature or context, should reasonably be construed as the confidential information of the other Party (e.g., technical, business, and financial information, including business plans and customer and supplier lists). (collectively, the “ Confidential Information ”). Each Party will use, and make Confidential

Information available to his own employees and third parties, only to the extent necessary for the performance of its obligations or exercise of its rights under this Contract. Notwithstanding anything to the contrary, nothing in this Section 7 shall restrict or prohibit Customer from exercising its licenses in accordance with Section 2 of this Contract.

7.2 Notwithstanding Section 7.1, the following shall not be considered Confidential Information:

7.3 Upon termination of this Agreement, a Party receiving Confidential Information from the furnishing Party shall return to the furnishing Party all written or electronic copies of the Confidential Information of the furnishing Party in the receiving Party’s possession.

8.1 Each Party will, at such Party’s sole cost and expense, indemnify, defend and hold harmless the other Party and the other Party’s directors, officers, partners, employees, representatives, successors, and assigns from and against any and all losses, liabilities, expenses (including reasonable attorneys fees), encumbrances, or other obligations arising from a claim, action, proceeding or suit by third party, which directly or indirectly, arises out of or is alleged to arise out of the Party’s (i) breach of any representation, warranty, or covenant in this Contract; (iii) negligent, reckless, or wilful acts or omissions in the performance of this Contract; or (iii) violation of Applicable Law.

8.2 Promptly the commencement or threatened commencement of any claim, action, proceeding or suit involving an indemnified claim, the indemnitee shall notify the indemnitor of such claim in writing. No failure to so notify the indemnitor shall relieve the indemnitor of the indemnitor’s obligations under this Contract except to the extent that it can demonstrate damages attributable to such failure. The indemnitor shall assume control of the defense or settlement of any such claim, action, proceeding or suit, except that the indemnitor shall obtain the prior written approval of the indemnitee before entering into any settlement or agreement that purports to bind the indemnitee, and the indemnitee may participate in any such defense or settlement at its sole cost and expense.

9. Term and termination

9.1 The term of this Agreement shall commence on the Effective Date.

9.2 Either Party may, upon written notice, terminate this Contract for material breach of the Contract by the other Party if such material breach remains uncured for more than 90 days after the breaching Party’s receipt of notice thereof from the non-breaching Party.

9.3 If Customer is overdue with the related payments for more than 3 months Contractor has the right to terminate this contract with immediate effect.

10.1 Contractor shall provide to Customer with such periodic reports and information related to the Know-how and Services as Customer reasonably requests, but in any event Contractor shall provide Customer not less than three months written updates relating the progress of Know-how and document transfers and the provision of Services.

10.2 Contractor shall meet with Customer, whether in person or by teleconference, as often as reasonably requested by Customer to discuss such topics related to the Contract as designated by Customer.

10.3 Within 10 days of the Effective Date, the Parties shall each designate and so inform the other party, in writing of: (i) a lead contact within their respective organizations for technical matters relating to the transfer of Know-how and the provision or receipt of Services; and (ii) a lead contact within their respective organizations for accounting and contracting matters.

11. Applicable Law

This Contract is governed by the Italian law excluding the United Nations Convention on Contracts for the International Sale of Goods (CISG).

12. Dispute resolution

12.1 In the event that any dispute or controversy should arise in connection with this Contract, the Parties shall negotiate in good faith to resolve such dispute or controversy. However, in the event that the Parties are unable to resolve such dispute within 30 days of its commencement, either Party may refer such dispute to arbitration under Section 12.2.

12.2 All disputes arising out of or in connection with this Contract shall be finally settled under the Rules of Arbitration of the International Chamber of Commerce by three arbitrators appointed in accordance with said Rules, the Chairman being appointed by the two other arbitrators or, in the event of their failure to reach an agreement, in accordance with said Rules. The seat of the arbitration will be Dubai, United Arab Emirates. The language of the arbitration will be English. Notwithstanding Section 12.1 and 12.2, either Party may at any time apply to a court of competent jurisdiction for interim or conservatory relief, and will not by doing so be held to have breached this arbitration agreement or to have infringed upon the powers of the arbitrators. The arbitral award may be enforced by any court having jurisdiction over the award, the applicable Party or its assets.

12.3 During any arbitration pursuant to this Contract, Customer and Contractor shall continue to fulfill their respective obligations under this Contract, unless the subject matter of the dispute is of such a nature that this is by no means possible until the dispute has been finally settled.

13. Force majeure

13.1 Neither Party shall be liable to the other for any failure to perform or delay in performance of its obligations hereunder caused by: (i) Act of God; (ii) outbreak of hostilities, riot, civil disturbance, or acts of terrorism; (iii) the act of any government or authority; (iv) fire, explosion, flood, fog or bad weather; or (v) any cause or circumstance whatsoever beyond its reasonable control.

13.2 If a Party is or will be prevented from performing any of its obligations due to force majeure as set forth in Section 13.1 above, it will give notice to the other Party of the event or circumstances constituting such force majeure. Such notice shall be given within 3 days after the Party became aware (or should have become aware) of the relevant event or circumstances constituting such force majeure. However, each Party shall at all times use its best efforts to minimize any delay in the performance of its obligations as a result of force majeure.