Ancillary: Overview, definition, and example
What is ancillary?
In business and legal agreements, ancillary refers to something that is secondary or supportive to the main agreement or transaction. Ancillary agreements, clauses, or services exist to supplement or facilitate the primary contract, but they are not the core focus of the deal.
For example, in a business sale, the main contract covers the transfer of ownership, but there may be ancillary agreements for non-compete obligations, transition assistance, or supplier arrangements. These additional agreements support the main transaction and help ensure everything runs smoothly.
Why is ancillary important?
Ancillary agreements and provisions play a crucial role in protecting business interests, clarifying responsibilities, and ensuring a complete deal. They:
- Help define additional obligations or rights that may not fit within the main contract.
- Reduce risks by addressing related but separate legal matters.
- Ensure smooth execution of the primary agreement by covering necessary details.
- Prevent disputes by making expectations clear upfront.
For example, in a service contract, the main agreement may cover the core services provided, while ancillary clauses define confidentiality rules, intellectual property ownership, or dispute resolution methods. Without these supporting provisions, the agreement might lack key protections.
Understanding ancillary through an example
Imagine a software company is licensing its product to a large corporation. The main contract outlines the licensing terms, pricing, and duration. However, there are also:
- An ancillary agreement for ongoing technical support.
- An ancillary clause that restricts the corporation from sharing the software with competitors.
- An ancillary provision detailing how updates and bug fixes will be handled.
These ancillary terms ensure that the main contract functions properly while addressing additional business concerns. Without them, the deal might be incomplete or leave critical issues unresolved.
An example of an ancillary clause
Here’s an example of a clause referring to ancillary agreements in a contract:
“The Parties acknowledge that this Agreement represents the principal terms of their arrangement. Any ancillary agreements executed in connection with this Agreement, including but not limited to confidentiality, transition, or support agreements, shall be considered enforceable and shall not override the terms herein unless expressly agreed in writing.”
Conclusion
Ancillary agreements and clauses may not be the main focus of a contract, but they are essential for ensuring a deal is complete, enforceable, and free of misunderstandings. They provide additional protections, clarify responsibilities, and help contracts function as intended.
When entering into a business agreement, consider what ancillary provisions or agreements might be necessary to cover all critical aspects of the deal. A well-structured contract includes not just the main terms but also the supporting details that help ensure success.
This article contains general legal information and does not contain legal advice. Cobrief is not a law firm or a substitute for an attorney or law firm. The law is complex and changes often. For legal advice, please ask a lawyer.