A supply agreement is a legal document which outlines the way in which a business supplies, sells or distributes goods to another party.
Supply agreements can be complex documents when they are not drafted effectively. As a supplier of goods or services, it is crucial that you have a supply agreement that outlines the way in which your goods and services will be distributed or sold to other parties.
Supply agreements are useful as they protect the rights of the parties in the agreement, hence preventing potential disputes and issues. Supply agreements can even be used by supply customers to ensure they are provided with the correct goods or services at the right time, whilst also providing them with various other rights.
Common terms that should be included in a supply agreement
A term outlining how payment will be made, the price per unit and whether price will be reviewed annually.
Payment before or after goods are received, or at regular intervals (monthly).
How long the supply agreement will last or is it an open-ended agreement which continues without a defined date.
There may be an arrangement between supplier and customer that states the goods will be supplied only to the customer. For example,you may have an exclusive supply arrangement with a clothing brand to make a specific line of clothing only available at your stores.
A volume clause will address the amount of goods to be supplied and how they will be delivered. Certain suppliers may stipulate a minimum requirement order in the agreement.
Product quality and standards
Pursuant to the Australian Consumer Law (ACL), all goods sold must be safe, of acceptable quality and fit for the purpose they were bought for. A supply agreement should include a term in which the supplier confirms that the products meet all the requirements outlined in the ACL as well as any other relevant laws. This provides customers with recourse if there are any issues with the products, as well as increasing their level of trust and confidence in their supplier.
As with most agreements, your supply agreement should outline a dispute resolution process. This ensures that a certain process is followed in the event of a dispute arising. Having a structured dispute process to follow limits the adverse effects of any disagreements that may arise.