This product supply agreement is between
The Supplier owns or controls the right to manufacture, market, distribute, and sell, and wishes to supply to the Buyer, and the Buyer wishes to purchase, the products set forth in Exhibit A (the "Products").
From time to time, the parties may enter into various agreements under which the Buyer will purchase and Supplier will furnish additional products, and the parties want to establish purchasing procedures and the terms governing these transactions.
The parties therefore agree as follows:
1. PURCHASE AND SUPPLY.
The Buyer shall buy
(a) Creation and Content. From time to time, the Buyer shall provide written requests to the Supplier listing the goods it requires (each a "Purchase Order"). The Supplier is not required to supply Products until a specific Purchase Order is issued by the Buyer, and the Buyer is not obliged to buy Products from the Supplier until it submits a specific Purchase Order listing the Products it requires. The Purchase Order will contain, at a minimum: (i) product description; (ii) quantity; (iii) price; (iv) the Buyer's ship-to and bill-to addresses; (v) requested delivery date; and (vi) an indication of whether the Product is subject to sales tax. (b) Cancellation and Amendment. The Buyer may cancel or amend, in whole or in part, any Purchase Order submitted to the Supplier by providing days' notice to the Supplier of that cancellation or amendment. (c) Types of Orders. The Buyer may issue two types of Purchase Orders. (i) Discrete Purchase Orders. A discrete Purchase Order is an order for a discrete amount of Product to be delivered on a specific delivery date. Discrete Purchase Orders are firm commitments by the Buyer, but may be cancelled or rescheduled as provided in this agreement. (ii) Blanket Purchase Orders. A blanket Purchase Order is an order for an amount of Product to be determined in the future and to be delivered over a period of time. The Buyer uses blanket Purchase Orders as an administrative convenience to track orders and to give the Supplier a reference number for invoicing. Blanket Purchase Orders are treated as forecasts only and are nonbinding on the Buyer.
(d) Timing. Unless otherwise specified in the Purchase Order,the Supplier shall deliver the Products within days of its receipt of a Purchase Order. (e) This Agreement Controls. If the terms of this agreement contradict the terms of any Purchase Order or order acceptance, the terms of this agreement will control. No boilerplate terms in either party's order-tracking documents will apply.
The Buyer shall inspect each delivery of Products received from the Supplier, and notify the Supplier of any defects within
- (a) Failure to Purchase. If, without excuse either by law or under this agreement, the Buyer fails to purchase the Minimum Quantities from the Supplier and the Supplier is ready, willing, and able to tender the Product in the appropriate amounts, the Buyer shall pay the Supplier a sum of $
as liquidated damages, within days of the end of the period described in section 1 above. - (b) Failure to Supply. If, without excuse either by law or under this agreement, the Supplier fails to supply the Buyer with the Minimum Quantities, and the Buyer is ready, willing, and able to buy the Product in the appropriate amounts, the Supplier shall pay the Buyer a sum of $
as liquidated damages, within days of the end of the period described described in section 1 above.
- (a) Exceptions. The Buyer shall not be required to purchase Products from the Supplier if:
- (i) the Buyer must acquire Products on a temporary or emergency basis;
- (ii) a customer of the Buyer expresses a preference for products supplied by a supplier other than the Supplier; or
- (iii) the Supplier is unable or unwilling to supply the Buyer with Products in required quantities, or that meet the quality, delivery, or other requirements of this agreement or of the Buyer's customers (as determined by the Buyer in good faith).
- (b) Remedies. If any of these events occurs, the Buyer may manufacture or buy Products from affiliates or other suppliers. Products purchased by the Buyer from these alternate suppliers will count towards the Minimum Quantities required under this agreement.
- (a) The Supplier warrants that the Products supplied shall be free from defects in material and manufacture and conform to specifications set forth
in any Purchase Order at the time of shipment. If any Product fails to conform to these specifications or any defect in material or manufacture appears withinmonths from the date of shipment, the Supplier's entire liability, and the Buyer's exclusive remedy, shall be, at the Buyer's option, either to repair or replace that defective Product within a reasonable time after written notification and return of the defective Product after the repair or replacement to the Buyer. - (b) THIS WARRANTY IS MADE IN LIEU OF ALL OTHER WARRANTIES, EXPRESS OR IMPLIED, INCLUDING, BUT NOT LIMITED TO, THE IMPLIED WARRANTY OF MERCHANTABILITY, THE IMPLIED WARRANTY OF FITNESS FOR A PARTICULAR PURPOSE, ANY IMPLIED WARRANTY ARISING OUT OF A COURSE OF DEALING OR OF PERFORMANCE, CUSTOM OR USAGE OF TRADE, EXCEPT OF TITLE AND AGAINST PATENT INFRINGEMENT.
The Supplier shall deliver the Products to a location designated by the Buyer (the "Delivery Point"). The Supplier assumes responsibility for the Products, and all risk of damage, loss, or delay of the Products, until the Products are delivered at the Delivery Point. Once the Products are at the Delivery Point, the Buyer assumes all responsibility for and risk of damage to those Products.
The Supplier shall supply the Products to the Buyer at the prices specified in the price list in Exhibit A. The price of each Product includes packaging costs, all applicable taxes, customs duties, export duties, or similar tariffs or fees that the Supplier may be required to pay or collect in connection with the performance of its obligations under, or in furtherance of, this agreement. The Buyer will not be charged for insurance or storage of the Products.
The Supplier shall send invoices to the Buyer, and the Buyer shall remit payments to the Supplier, at the addresses listed in this agreement. The Buyer shall remit those payments within
- (a) Term. This agreement will become effective as described in section
22 23 23 23 24 24 24 25 and continue for an initial term ofyear(s) (the "Term"). Unless either party gives written notice to the other at least days before the end of the Term, this agreement will renew automatically for an additional -year term. This automatic extension will continue to apply at the end of each extended period until the agreement is terminated. - (b) Termination. This agreement may be terminated by either party for a material breach of any provision of this agreement by the other party, if the other party's material breach is not cured within
days of receipt of written notice of the breach.
If either party terminates this agreement because of the other party's default, the nonbreaching party, in addition to all rights it has under this agreement,shall have the right to exercise all remedies available at law or in equity. All rights and remedies are cumulative, and the election of one remedy shall not preclude another. Any termination will be without prejudice to accrued rights. Specifically, a termination due to default of delivery or payment for the Products required under this agreement will not affect or terminate the rights and obligations of the parties that have accrued under this agreement before or after that default.
- (a) Of the Buyer. The Supplier shall at all times indemnify the Buyer against any award, charge, claim, compensatory damages, cost, damages, exemplary damages, diminution in value, expense, fee, fine, interest, judgment, liability, settlement payment, penalty, or other loss (a "Loss") or any attorney's or other professional's fee and disbursement, court filing fee, court cost, arbitration fee, arbitration cost, witness fee, and each other fee and cost of investigating and defending or asserting a claim for indemnification (a "Litigation Expense") arising out of:
- (i) any claim of breach of any express or implied warranty or negligence or strict liability, product liability, or similar theory in connection with the production, design, sale, or use of any of the Products purchased by the Buyer;
- (ii) any claims of patent or trademark infringement, or other violation of intellectual property rights, of third persons in connection with the production, design, sale, or use of any of the Products purchased by Buyer under this agreement or the use of the trademarks, trade names, logos, or other intellectual property pertaining to those; and
- (iii) all other claims and liabilities of every kind or character arising out of, or related to, the production, design, sale, or use of the Products purchased by the Buyer under this agreement, unless these claims or liabilities result solely from the Buyer's gross negligence or knowing violation of law.
- (b) Of the Supplier. The Buyer shall at all times indemnify the Supplier against Loss or Litigation Expense caused by any breach of any of the representations or agreements made by the Buyer under this agreement.
A party will not be considered in breach of or in default because of, and will not be liable to the other party for, any delay or failure to perform its obligations under this agreement by reason of fire, earthquake, flood, explosion, strike, riot, war, terrorism, or similar event beyond that party's reasonable control (each a "Force Majeure Event"). However, if a Force Majeure Event occurs, the affected party shall, as soon as practicable:
- (a) notify the other party of the Force Majeure Event and its impact on performance under this agreement; and
- (b) use reasonable efforts to resolve any issues resulting from the Force Majeure Event and perform its obligations under this agreement.
- (a) Choice of Law. The laws of the state of
govern this note (without giving effect to its conflicts of law principles). - (b) Choice of Forum. Both parties consent to the personal jurisdiction of the state and federal courts in
, . - (c) Attorneys' Fees. If either party employs attorneys to enforce any rights arising out of or relating to this agreement, the losing party shall reimburse the prevailing party for its reasonable attorneys' fees.
No amendment to this agreement will be effective unless it is in writing and signed by a party or its authorized representative.
- (a) No Assignment. Neither party may assign any of its rights under this agreement, except with the prior written consent of the other party. All voluntary assignments of rights are limited by this subsection.
- (b) No Delegation. Neither party may delegate any performance under this agreement, except with the prior written consent of the other party.
- (c) Enforceability of an Assignment or Delegation. If a purported assignment or purported delegation is made in violation of this section, it is void.
- (a) Counterparts. The parties may execute this agreement in any number of counterparts, each of which is an original but all of which constitute one and the same instrument.
- (b) Electronic Signatures. This agreement, agreements ancillary to this agreement, and related documents entered into in connection with this agreement are signed when a party's signature is delivered by facsimile, email, or other electronic medium. These signatures must be treated in all respects as having the same force and effect as original signatures.
If any one or more of the provisions contained in this agreement is, for any reason, held to be invalid, illegal, or unenforceable in any respect, that invalidity, illegality, or unenforceability will not affect any other provisions of this agreement, but this agreement will be construed as if those invalid, illegal, or unenforceable provisions had never been contained in it, unless the deletion of those provisions would result in such a material change so as to cause completion of the transactions contemplated by this agreement to be unreasonable.
- (a) Writing; Permitted Delivery Methods. Each party giving or making any notice, request, demand, or other communication required or permitted by this note shall give that notice in writing and use one of the following types of delivery, each of which is a writing for purposes of this note: personal delivery, mail (registered or certified mail, postage prepaid, return-receipt requested), nationally recognized overnight courier (fees prepaid), facsimile, or email.
- (b) Addresses. A party shall address notices under this section to a party at the following addresses:
- If to the Supplier:
,
- If to the Buyer:
,
- (c) Effectiveness. A notice is effective only if the party giving notice complies with subsections (a) and (b) and if the recipient receives the notice.
No waiver of a breach, failure of any condition, or any right or remedy contained in or granted by the provisions of this agreement will be effective unless it is in writing and signed by the party waiving the breach, failure, right, or remedy. No waiver of any breach, failure, right, or remedy will be deemed a waiver of any other breach, failure, right, or remedy, whether or not similar, and no waiver will constitute a continuing waiver, unless the writing so specifies.
This agreement constitutes the final agreement of the parties. It is the complete and exclusive expression of the parties' agreement about the subject matter of this agreement. All prior and contemporaneous communications, negotiations, and agreements between the parties relating to the subject matter of this agreement are expressly merged into and superseded by this agreement. The provisions of this agreement may not be explained, supplemented, or qualified by evidence of trade usage or a prior course of dealings. Neither party was induced to enter this agreement by, and neither party is relying on, any statement, representation, warranty, or agreement of the other party except those set forth expressly in this agreement. Except as set forth expressly in this agreement, there are no conditions precedent to this agreement's effectiveness.
The descriptive headings of the sections and subsections of this agreement are for convenience only, and do not affect this agreement's construction or interpretation.
This agreement will become effective when all parties have signed it. The date this agreement is signed by the last party to sign it (as indicated by the date associated with that party's signature) will be deemed the date of this agreement.
Each party shall use all reasonable efforts to take, or cause to be taken, all actions necessary or desirable to consummate and make effective the transactions this agreement contemplates or to evidence or carry out the intent and purposes of this agreement.
[SIGNATURE PAGE FOLLOWS]
Each party is signing this bill of sale on the date stated opposite that party's signature.
Date: _________________ |
By:__________________________________________ |
| Name: |
|
Date: _________________ |
By:__________________________________________ |
| Name: |
[PAGE BREAK HERE]
EXHIBIT A
PRODUCT AND PRICING LIST
| add border | |
|---|---|
| PRODUCT NAME | PRICE |
| 1. |
$ |
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Product supply agreement: How-to guide
Globalization has had a tremendous impact on trade and business all over the world. New products flood the market every year, and before a product reaches the public, it may pass through the hands of international manufacturers, distributors, retailers, or buyers. Thus, It has become increasingly important to ensure each party’s rights and responsibilities are established at the beginning of a business relationship so any items transported can move smoothly through the process.
A product supply agreement or product supply contract establishes the terms on which a seller will supply products to a buyer. The agreement must be clearly written to ensure that products will reach the hands of the consumers quickly and with little complication. A well-drafted agreement will help ensure that all parties’ business requirements are satisfied on a timely and complete basis.
This article contains everything you need to understand to complete your product supply agreement. Successful business deals begin with good documentation, so it is important to have a written agreement handy.
Key pointers to remember while creating supply agreements
Determine the goals of the supply agreement
Before signing, both parties should determine exactly what the agreement's goals are. If you are the supplier, decide how many product items you can realistically provide to the buyer within the designated time.
If you are the buyer, decide how many product items you realistically need for your business within the designated time. A good product supply agreement accurately captures the parties' intentions. Before finalizing the draft, ensure the parties are on the same page.
Duration of the agreement
A supply agreement is usually effective for a specific period of time. Sometimes, however, it can be drafted to continue indefinitely (i.e., with no particular end date). For example, you can set the duration of your agreement to one year, and if you’re happy with the supplier, you can extend it after discussion.
Pricing details of the products
A product supply agreement should include both price and payment terms. For short-term agreements, it is often better to agree to a set price. For long-term agreements, it may be better to provide details about changing prices at regular intervals.
For example, a long-term contract could specify a discount from the supplier’s pricing list. Alternatively, the parties could set a price in a schedule to the agreement and agree that it may be changed at any time.
Entering into an exclusive business relationship
Before entering into an agreement in which a supplier agrees to deal with a buyer exclusively (i.e., not to give products to any other company for sale), make sure both parties understand the supplier’s business. Suppose the supplier offers a unique product or service, and the buyer’s competitors need that unique product or service to compete in the market. In that case, the parties may be unable to have an exclusive deal. This may be considered illegal if it restricts competition.
Either party should review the supply agreement thoroughly
Give each party time to review the supply agreement. They must ensure that all discussed and agreed-upon terms and conditions are mentioned and clauses aren’t misinterpreted.
The parties must sign two copies once the supply agreement is ready after the changes. The buyer keeps one copy of the agreement, and the supplier retains the other.
Depending upon the complexity of the supply agreement, if the supplier or purchaser wishes to have a witness, then the needed arrangements should be made during the signing ceremony.
You can appoint an attorney to help you draft a document that meets your needs.
Important components included in a product supply agreement
The following instructions will help you understand the terms of your product supply agreement.
Introduction of parties
This section identifies the document as a product supply agreement. You need to provide the effective date (the date when the contract was signed) and the details of the parties involved in the agreement. If applicable, mention what type of organization(s) they are.
In a product supply agreement, the “supplier” is the party who agrees to supply the products, and the “buyer” is the party agreeing to purchase them.
Recitals
The “whereas” clauses, referred to as recitals, define the world of the agreement and offer key information about the parties. Describe the supplier’s business in general terms here. Also, give a detailed product list that the supplier will be selling to the buyer. Be specific. If there are serial numbers or titles to the items, include those as well.
Term
The time period during which the products are supplied is called the “term.” The term starts on the date when the agreement is signed. Provide the number of years you want the initial term to run.
In this clause, you can also mention whether you want the supply agreement to be renewed automatically at the end of the initial term. If you include this clause, consider how long you want additional terms to be. Depending on your arrangement, this can be the same as the initial term, longer or shorter. In an auto-renewal agreement, you must also give an advance written notice to stop a renewal term from taking effect.
Agreement of purchase and sale
This section states the supplier’s promise to sell and the buyer’s promise to buy the products in supply agreements.
Minimum quantities
It is the buyer’s promise to buy at least a certain amount of products within a given time frame. Enter this number or quantity and the time within which the buyer must buy them. Depending on your agreement, this can be days, months, or years. You can also designate how this supply of products will be measured (e.g., in units, pounds, volume, cost, etc.).
Failure to purchase minimum quantities
This clause states that if the buyer doesn’t buy the minimum quantities and those amounts are available, it must pay the supplier a certain amount. Provide the amount and deadline by which it must be paid.
This provision is for “liquidated damages,” which is simply an agreement by the parties to set a specific damages amount in case of a breach. This can be any reasonable amount.
Failure to supply minimum quantities
This part states that if the supplier doesn’t supply the minimum quantities, it must pay the buyer a certain amount. Enter this amount and the time frame within which it must be paid.
Exceptions to purchase requirements
In supply agreements, this provision provides certain exceptions to the buyer’s requirement to buy from the supplier. These can be:
- Emergencies
- If the buyer’s customer requests different items
- If the supplier can’t or won’t supply the items
Inspection and acceptance
This section allows the buyer to examine the products received and determine whether they are acceptable. Give the buyer the time period to perform such an audit. Under this section, the supplier agrees to replace the defective product or refund the cost of such product if the buyer finds it unacceptable.
Warranty and limitation of remedies; disclaimer
In this section, the supplier promises not to deliver defective products and gives assurance that the products will be of the assured quality. If the products happen to have any defect after their shipment, the supplier promises to repair or replace such products. There may be a specific period for which such defects should be reported to the supplier. For example, if the buyer receives a defective product but reports it after six months of the receiving date, then it might be considered as an invalid request.
During such an event, the supplier party expressly disclaims that the quality standards weren’t compromised from their end. Such defects might have happened either from manufacturing facilities or during transit.
Issuance of purchase order
This provision requires the buyer to make written requests before the products will be supplied. If this is a long-term contract that requires multiple deliveries, having this provision helps. However, if your arrangement includes only a small number of deliveries, it can be outlined in the supply agreement.
Cancellation and amendment of purchase order
This part states that if your arrangement requires a purchase order to place orders, the buyer is allowed to cancel or change the orders if it provides advance notice.
Delivery of products/shipping
This section provides the details regarding the delivery of products such as:
- The delivery schedule: Depending on the type of product, the delivery schedule can be weekly, monthly, quarterly, or yearly basis.
- Delivery date: The time and date by which the supplier will deliver the products.
- Shipping costs: Add details regarding the transfer price and who’ll bear the costs incurred for the shipping.
Use this section also to define each party’s responsibility during shipping, e.g.,
- Until the products reach delivery, the supplier will be responsible for any damage to, loss of, or delay in providing the products.
- Once the products are at the delivery point, this responsibility is transferred to the buyer.
Pricing
In this part, enter the applicable prices for the products sold (and supplied) under the product supply contract. Be sure to indicate if these prices may change over the term. According to the terms of this section, the prices include all taxes and fees, so keep that in mind as you negotiate the prices for the products.
Payment terms
This section specifies how many days after receipt of the supplier’s invoice the buyer has to pay the amounts owed. Give the number of days you and the other party have agreed to.
Intellectual property rights
Here the supplier expects the buyer to safeguard their intellectual property and keep trade secrets private. If the supplier owns any intellectual property (e.g., trademarks, copyrights, designs, drawings, etc.), including provisions spelling out ownership rights in that property is a good idea.
This provision requires the buyer to use the supplier’s intellectual property on the products and the supplier to help the buyer’s staff use the supplier’s trademarks or name. However, the buyer is not given any direct or indirect ownership rights to the supplier’s intellectual property. The buyer is only granted the right to use the supplier’s property.
Confidentiality
This optional provision allows the supplier to require the buyer to keep information mentioned in the agreement private. Both Parties are required to keep information about the products confidential as well.
Termination
This clause states that the agreement can end before time if certain actions or material breaches occur. For example, if the buyer doesn’t pay the supplier and continuously defaults on the payments, the supplier has the right to end the agreement. The parties should also notify each other of the intent to terminate the agreement and its reason.
Default and remedies
Define each party's rights if either party defaults under the supply agreement.
Force majeure
Contracts may contain a clause known as "force majeure" that releases parties from liability for unforeseen and unavoidable disasters that disrupt the planned course of events and prohibit parties from carrying out their duties. These provisions typically cover both human-caused and natural calamities, such as war and man-made illnesses, and disasters like hurricanes, tornadoes, and earthquakes. During such instances, the parties should give a written notice as soon as possible.
Such notification helps the parties prepare for contingencies and promotes business relationships.
Indemnification
This provision allocates responsibilities between the parties if problems arise in the future and protects each party from the financial consequences of the other’s illegal or harmful conduct.
For example, if the supplier fails to produce products of the agreed quality or sells defective products, the buyer will not be held responsible for any issues arising.
The supplier is also protected if the buyer doesn’t meet its obligations under the conditions of the agreement.
Arbitration
This commonly used optional provision requires the parties to resolve disputes in arbitration (rather than in the courts). There may be local restrictions (or limitations in your industry) about using these clauses, so reviewing laws governing arbitration in your area and your field is a good idea.
Successors and assigns
This part explains that if the involved parties get acquired by a new company or the ownership gets transferred to their successors or heirs, then all the rights and obligations will also be transferred to the new company or successor.
Entire agreement
Here, the parties agree to sign the agreement according to the terms and conditions mentioned in the document as a whole.
Modification
This section indicates that any changes to the document are only effective if prior written consent is taken from the involved parties.
Notice
This section lists the addresses to which all official or legal correspondence should be delivered. Provide the mailing address for both the supplier and the buyer.
Governing law
This clause allows the parties to choose the applicable law regarding the product supply contract. Once the state and local laws are decided, those applicable laws shall govern and interpret the agreement.
Severability
This section protects the terms of the agreement as a whole, even if one part is later invalidated. For example, if a state law prohibits arbitration clauses, it will not undo the entire agreement. Instead, only the section dealing with arbitration would be invalidated, leaving the remainder of the document enforceable.
Counterparts; electronic signatures
If the parties involved are based in different locations, this clause allows them to sign the agreement using electronic devices or electronic signatures.
Affirmation of the parties
The parties state that they have entered into the agreement voluntarily, without relying on any promises, and that they understand its contents.
Headings
This section states that the headings at the beginning of each section are meant to organize the document. The headings should not be used to interpret the agreement.
A product supply agreement can be long and exhaustive, and creating an agreement from scratch can be tiresome. A product supply agreement template helps you create your supply agreements much quicker and easier. A product supply agreement ensures that both parties understand their rights and obligations. With careful drafting, your product supply agreement will lay the foundation for a profitable (and long-lasting) relationship between supplier and buyer.
LegalZoom also offers comprehensive agreement templates that are easy to use and readily available.
Frequently asked questions
What’s a product supply agreement?
A product supply agreement, sometimes called a supply agreement, defines the rights and responsibilities of a company that will supply goods (usually a manufacturer or wholesale distributor) and another that will receive them to sell at retail.
A supply agreement clarifies the terms of product orders and secures the inventory needed to keep sales flowing. It helps to set and maintain the supply in the time frames and inventory amounts that are best for both businesses.
What details are needed to complete a supply agreement?
The information you'll need to have handy to complete your supply agreement are:
- Who it's coming from: Have the business name and address ready
- Who it's going to: Know who this document is going to and have their contact information handy
- Which state will govern the supply agreement: Specify the state so it's clear what laws apply
- Time period: Be clear about how long each party has to notify the other about missing products, damaged merchandise, changes in inventory, or disputes
- Product information: Know precisely what product lines will be provided, the shipping frequency, trademark information, and prices per unit
Free Product Supply Agreement Template
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