A supply contract is an agreement outlining the way in which one party, the supplier, supplies, sells or distributes goods to another party, the customer. Supply contracts are specifically negotiated and drafted for a particular job/transaction and often include finer detail than terms of trade agreements.
Business contracts concerning supply relationships are often categorised as either:
- Supply contracts
- Terms of trade
What is Included in a Supply Contract?
A supply contract may include:
- Price, invoicing and payment
- Description of supply and timetables for delivery
- Confidentiality
What are Terms of Trade?
A terms of trade agreement regulates an ongoing relationship between a supplier and customer. Terms of trade agreements are contracts that set out each party’s rights and responsibilities.
What is Included in a Terms of Trade?
A terms of trade agreement may include:
- Duty each party owes to one another
- Duration of the relationship
- Costs associated with the supply of goods or services
- Warranty periods for defective goods or services
Why are Supply Contracts and Terms of Trade Important?
Supply contracts and terms of trade are important in clearly setting out the rights and responsibilities of each party and reflecting the agreement between both parties. This removes any ambiguity or confusion and minimises the risk of disputes between parties.
Such documents can clearly define liability and minimise legal and financial risk for parties involved.
Supply contracts and terms of trade can be legally binding if executed correctly. If one party breaches the contract, they may have to compensate for any loss they incur.
Key Takeaways
Contracts with a business’ suppliers that are well negotiated, drafted and executed should be a standard aspect of doing business.
Should you require further legal advice please contact OpenLegal by filling in the form on this page or calling 1300 337 997.
Alana is a legal intern at OpenLegal whilst studying a Bachelor of Laws at Macquarie University. Alana’s key areas of interest include commercial law and property law.
Phil is a director at OpenLegal. He has over 16 years experience working in private practice and in-house counsel in Sydney and London, giving him expertise in employment law, IP, finance, leases, dispute resolution, insurance and contracts.
