Challenges of Contractual Agreements

1st January, 1970

Challenges of Contractual Agreements

In the U.S., clinical trials that are conducted under regulations set by the Food and Drug Administration (FDA) require a contract between the contract research organisation (CRO) and the company hiring them. The written agreement can be up to 50 pages, including numerous technical terms, which is why not understanding the contract thoroughly could lead to serious legal ramifications. Here’s an insight into overcoming challenges of contractual agreements.

Contract Content and Language

With clinical trials taking on average up to 12 years to complete, contracts need to cover all possible contingencies. This is why agreements must state that in the event of a specific situation, the CRO will notify the party they are working with. There are many different obligations that need to be covered from regulations to clinical funding. 

It’s crucial to stay in contact with CROs to ensure the entire contract has been covered for the safety of all members involved. Whilst reviewing a contract, there will need to be a definitions section. It’s important that words and phrases that aren’t understood are defined in this section so there is no unknown breach of contract. There will be sections covering relationships between both the CRO and pharmaceutical company, as well as words used such as “any”, “all”, “without limitations”, “immediately” and “sole discretion” to ensure parties have full control of their products in contractual agreements.


Depending on the parties involved, the payment is mentioned in the contracts and in a number of methods. With upfront payments, this is usually to cover personnel resources, raw materials or supplies. However, there will be more leverage for CROs in the event where work is not completed or they are deemed negligent. Monthly pay is based on work performed; it should review and approve the units each month, prior to the invoice being generated. It should never be used for performance-based vendors or when the work is variable.


With increased competition and safety precautions, confidential information should be identified. They will be protected by laws, such as the latest General Data Protection Regulation in the EU, or principles set out by health services as well as administrations responsible for clinical trials like the FDA. Breaching these contracts will result in serious consequences financially.

Would you like to find out more about challenges of contractual agreements? There will be a panel discussion organized by Egalet CSO Karsten Lindhardt on outlining a rational approach to contract agreements in order to build transparent relationships between sponsors and CROs. This October, the Outsourcing in Clinical Trial Nordics 2018 conference will also address the solutions to maintaining a profitable pharmaceutical company. For more information, please visit or alternatively email us at:


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