Worldwide Compatabilty - USA, Canada, UK & Australia etc.
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A supply agreement is a contract between you and your supplier outlining the products you are buying, how they are delivered, and how you will resolve disputes and handle risks, among other issues. When the buyer and seller agree to the contract, they become legally bound by its terms.
As a business owner, you recognize that identifying a supplier is only the first step. A successful buyer and seller relationship requires the following issues to be addressed.
Entering into a legally enforceable contract with suppliers ensures that expectations for these and other factors are addressed early in the relationship. The contract should list the laws under which it is enforced. These laws vary by location. Consider seeking legal assistance to determine your location’s legal requirements.
Let’s discuss how a supply agreement works and how to draft yours, and then answer some frequently asked questions about this document.
Supply agreements are integral to running your business. They lay the ground rules for purchasing, deliveries, disputes, warranties, and more to ensure the partnership serves both parties well. We provide free, beginner-friendly templates to make starting your agreement easy.
A supply agreement addresses all facets of the supplier/buyer relationship. It can protect both parties’ interests and prevent conflicts if well crafted. The document should cover the following aspects.
Listing the products may seem inconsequential, but it is crucial. It avoids confusion. For example, suppliers who sell closely related products will have a definitive reference of what product the buyer wants, no matter how closely the other items work together.
The supplier needs to know how many units you want and how often. When discussing quantities, consider current needs and forecast future demand and the supplier’s capacity to fulfill those needs.
Consider the price per unit of each item, the total cost, and any discounts applied. The document also addresses how to handle changes in pricing and extra expenses, such as taxes and delivery costs.
A predictable delivery schedule works best for everyone. Setting the dates reduces supply chain issues, ensuring your business always has the products it needs to run.
Decide in advance how you will handle delays, whether these are the result of incompetence or unforeseeable circumstances.
The contract discusses any supplier guarantees to service or repair items, how long the warranties last, and the situations in which they apply.
A supply agreement must address payment amounts, methods, schedules, and terms. It also sets penalties for late payments.
Discuss whether the supplier and buyer are exclusive to each other. Exclusivity can mean that the supplier sells only to you, or you buy only from them. A supplier can also be preferred, meaning you do not buy elsewhere unless the supplier doesn’t have or cannot deliver what you need. The buyer and seller may require a separate exclusive supply contract for this.
Determine how disagreements will be resolved. A mediation clause in the contract is often in the best interest of both parties. It stipulates that disputes arising from the contract will be handled via a third-party mediator before legal action can occur. Otherwise, you leave yourselves open to standoffs that can disrupt business activities.
Include the effective and end dates of the contract.
Having the contract addresses these issues and frees up time you would spend in back-and-forths so you can focus on growing your business. The following section discusses how to prepare ahead when creating a supply agreement.
Whether you draft the contract or have an attorney do it, you should participate to protect your interests. Before preparing a supply agreement, consider the following matters.
Be clear about what you need the supplier to do. Discuss the items you intend to buy from them, the quantities, and the contract duration, depending on your business’s needs. Ensure you understand the other party’s needs and requirements as well.
The best time to negotiate discounts and better contract terms is before drafting.
Every relationship works best when the communication channels stay open. It’s crucial to voice your concerns and ask questions if something needs clarification.
Neither party should take advantage of the other by slipping one-sided conditions into the agreement. Especially should there be no clauses excusing the loss of life resulting from negligence.
Either party can draft the contract, but you must understand every letter of the document before agreeing to it.
Each supply agreement is unique. Therefore, you should consider your distinct relationship with the supplier and the legal requirements. You can prepare your document in ten easy steps.
You may want an attorney to review the document before signing.
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