Draft a Manufacturing Agreement

Note: Links to our free templates are at the bottom of this long guide.
Also note: This is not legal advice

Introduction

Manufacturing agreements are an integral part of any manufacturing business. They are legally binding contracts that set out the obligations, terms and conditions of the relationship between all parties involved in the manufacturing process, from the manufacturer to customer and any other relevant parties. These agreements serve to protect both the customer and manufacturer from potential legal issues and disputes, as well as hold all parties involved accountable for their actions. Therefore, it is essential that a well-drafted agreement be in place before every manufacturing process begins.

From the perspective of The Genie AI team who provide free templates for creating high quality legal documents without paying a lawyer, a good manufacturing agreement should include clauses outlining product specifications, timelines, dispute resolution provisions such as arbitration and mediation, liabilities protection clauses, and intellectual property rights protection clauses. Crucially it should also include provisions addressing payment obligations on both sides and the right of either party to terminate the agreement if necessary.

Furthermore, drafting a good contract requires strong attention to detail when creating each clause which can often be difficult without specialist knowledge or experience in crafting legal documents. That’s why we created Genie AI - ‘the world’s largest open source template library’ – with millions of data points teaching our system what a market standard document looks like so you don’t have to! Our community template library enables anyone to draft customised legal documents quickly with no hassle; eliminating any need for expensive lawyers or lengthy meetings trying to reach consensus on various topics when it comes to manufacturing agreements…

In conclusion, Manufacturing Agreements are an essential component of any successful business relationship within the manufacturing industry. With Genie AI’s dataset and community template library you can craft winning contracts quickly without needing expensive help from lawyers; ensuring that all those involved in your business relationship are held responsible for their commitments & obligations while protecting everyone’s rights & interests along the way - no account necessary! Read on below for our step-by-step guidance & information on how you can access our template library today!

Definitions

Roles and Responsibilities: The duties of each person or party involved in an agreement.
Payment Frequency: How often payments are due during a specified period.
Payment Deadlines: The date by which payments must be made.
Acceptable Payment Methods: The forms of payment that are allowed in an agreement.
Quality Control Standards: The criteria used to assess the quality of a product.
Terms of Delivery: The procedures, timeline, and methods of delivery for a product.
Intellectual Property Rights: The legal rights related to the ownership of an idea, invention, or creative work.
Dispute Resolution Methods: The strategies used to resolve conflicts between parties.
Confidentiality Requirements: The rules and regulations for handling confidential information.
Hold Harmless Clause: A clause that specifies which party is responsible for any damages.
Governing Law: The laws and regulations that apply to an agreement.

Contents

1. Establishing the parties’ roles and responsibilities
2. Defining the product being manufactured
3. Setting the terms of payment
4. Outlining payment frequency
5. Establishing payment deadlines
6. Defining acceptable payment methods
7. Establishing the length of the agreement
8. Identifying applicable laws and regulations
9. Researching local, state, or federal regulations
10. Consulting legal counsel
11. Establishing quality control standards
12. Setting the terms of delivery
13. Outlining delivery schedule
14. Identifying delivery methods
15. Specifying delivery address
16. Establishing terms for early termination
17. Outlining conditions for early termination
18. Describing the termination process
19. Addressing intellectual property rights
20. Specifying who owns the IP
21. Defining licensing terms
22. Establishing dispute resolution methods
23. Outlining methods of dispute resolution
24. Establishing a timeline for resolution
25. Establishing confidentiality requirements
26. Setting standards for sharing confidential information
27. Defining the parameters for non-disclosure
28. Including a ‘hold harmless’ clause
29. Defining the parties’ liability
30. Specifying which party is responsible for damages
31. Defining the governing law
32. Identifying the jurisdiction and court system
33. Specifying the governing law
34. Signing the agreement
35. Scheduling a signing ceremony
36. Preparing and exchanging signed documents

Get started

Establishing the parties’ roles and responsibilities

• Determine who will be responsible for the design, manufacture, and distribution of the product
• Define the roles and responsibilities of each party in the agreement
• Outline the obligations of each party in the agreement
• Specify any additional services that may be provided by either party
• Set out any payment conditions and delivery terms
• Ensure that all parties understand the agreement and their responsibilities

Once all of the above have been established and agreed upon, you can move on to defining the product that is being manufactured.

Defining the product being manufactured

• Outline the product or products that will be manufactured under the agreement
• Specify the materials and parts that will be used to create the product
• Include details about the dimensions, weight, and other measurements
• Identify the quality standards that must be met for the product to be accepted
• List any special requirements for the product
• Add any other information that is necessary for the product

When you have outlined the product being manufactured, you can move on to setting the terms of payment.

Setting the terms of payment

• Research and determine the most suitable payment method for the agreement
• Agree on the payment amount for each product deliverable
• Discuss the payment terms and conditions such as discounts, payment due dates, and late payment charges
• Specify if the payment will be made in a single lump sum or in installments
• Draft a clause in the manufacturing agreement that outlines the agreed terms of payment
• Once all parties have agreed on the payment terms and conditions, you can check off this step and move on to the next step of outlining payment frequency.

Outlining payment frequency

• Decide how often the payments will be made (monthly, quarterly, etc.)
• Note the payment frequency in the agreement
• Make sure all parties are in agreement with the payment frequency
• Check that the payment frequency is reflected in the agreement
• Upon completion of this step, review the agreement to make sure the payment frequency is clearly outlined and agreed upon by all parties.

Establishing payment deadlines

• Establish payment deadlines: Define the payment due date for each invoice, typically within 30 days of the invoice date.
• Identify any penalty or interest fees in the event of a late payment and the conditions under which they may be applied.
• Include language that the buyer is responsible for any bank or wire transfer fees.
• Once payment deadlines are established, you can move on to the next step of defining acceptable payment methods.

Defining acceptable payment methods

• Agree on an acceptable payment method with the manufacturer - this could be payment by cash, cheque, credit card or direct bank transfer
• Specify the terms of payment - decide on the time period for payment, such as payment due on receipt of invoice, payment within 30 days of invoice date, or other agreed upon terms
• Make sure to include a clause in the contract that allows for late payment fees if the payment is not received on time
• Record the payment method in the contract document and make sure both parties sign to confirm the agreement
• When all parties have agreed to the payment methods and signed the contract, you can check this step off your list and move on to the next step.

Establishing the length of the agreement

• Clarify how long the agreement will last, and if it is a fixed-term or an open-ended agreement
• Establish the effective date of the agreement and the date when it will end
• Include a clause that outlines the process of renewal or termination of the agreement
• Determine the notice period for either party to terminate the agreement
• When all the details have been discussed and agreed upon, document it in writing
• Review and sign the agreement to make it legally binding

Once all these steps are completed, you can move on to the next step of identifying applicable laws and regulations.

Identifying applicable laws and regulations

• Research applicable laws and regulations in the state or country where the agreement will be based.
• Research any specific laws and regulations that may apply to the industry of the parties involved in the agreement.
• Consider any applicable international laws and regulations that may need to be included in the agreement.
• Make a list of all applicable laws and regulations that must be adhered to.
• When you have a full list of applicable laws and regulations, you can move on to the next step.

Researching local, state, or federal regulations

• Locate the relevant state, local, or federal regulations that apply to the manufacturing agreement
• Research each regulation to understand their exact requirements and how they will impact the agreement
• Take notes during research to track which regulations apply and how they should be addressed in the agreement
• When you have identified all the applicable regulations and have taken thorough notes on each one, you can check this off your list and move on to the next step of consulting legal counsel.

Consulting legal counsel

• Research and find a lawyer who can help you draft a manufacturing agreement
• Make sure they are familiar with the relevant laws and regulations
• Schedule a meeting to discuss the details of the agreement
• Have the lawyer review the agreement before signing
• Once the lawyer has reviewed the agreement and you have both signed off on it, you can check this step off your list and move on to the next step.

Establishing quality control standards

• Research and determine the quality control standards required for the manufacturing agreement
• Work with the manufacturer to ensure they understand the standards and agree to comply with them
• Draft the quality control standards into the agreement
• Have legal counsel review the quality control standards to ensure they are legally binding
• Finalize the agreement with the manufacturer
• Check off this step and move on to the next step of setting the terms of delivery.

Setting the terms of delivery

• Identify the specific details of delivery, including timeframes, locations, and any expected delays
• Specify in the agreement who is responsible for shipping and receiving the goods
• Determine which party is responsible for payment of shipping costs
• Determine who is responsible for any damages or delays that may occur during shipping
• Specify any other details relating to the delivery of goods
• When all details are agreed upon, sign and date the agreement
• You can check this off your list and move on to the next step once the agreement is signed and dated.

Outlining delivery schedule

• Establish a timeline for when goods should be delivered.
• Specify any restrictions or limitations on delivery.
• Discuss shipping terms, such as who pays the shipping costs.
• Include any other relevant details, such as time windows for delivery, expected time of arrival, or any specific requirements.
• When complete, you should have a detailed agreement outlining the delivery schedule for goods.

Identifying delivery methods

• Research available delivery methods for goods and services to be provided in the manufacturing agreement
• Consider factors such as cost, speed, and reliability when evaluating delivery methods
• Consider any restrictions or requirements from either party regarding the delivery method
• Document the selected delivery method in the manufacturing agreement
• Once the delivery method is documented, you can move on to the next step of specifying the delivery address.

Specifying delivery address

• Determine the address of the manufacturing facility and the address of the delivery destination.
• Specify the delivery address in the Manufacturing Agreement, including the full name and address of the recipient.
• Confirm that the agreed-upon address is accurate and complete.
• Once the delivery address is included and confirmed, you can check this off your list and move on to the next step of establishing terms for early termination.

Establishing terms for early termination

• Review the agreement and determine the circumstances in which either party may terminate the agreement
• Discuss the consequences and remedies that would apply in the event of early termination
• Include a clause that outlines the rights and responsibilities of each party in the event of early termination
• Outline what process must be followed in order for either party to terminate the agreement early
• Once all terms for early termination have been established, review and sign the agreement
• Check off this step from your list and move onto the next step: ““Outlining conditions for early termination””

Outlining conditions for early termination

• Determine what conditions should be required for early termination of the agreement, including conditions for both parties
• Set out what the consequences are if either party breaches any of the conditions for early termination
• Include a clause in the agreement that states that either party can terminate the agreement early if all conditions are met
• Make sure to include a clause that states that the termination is not effective until both parties have signed the agreement
• Check if all the conditions for early termination are adequately outlined in the agreement before signing it off, to ensure that the agreement is legally binding

How you’ll know when you can check this off your list and move on to the next step:

• You will know that this step is completed when you have written a clause in the agreement that outlines all the conditions for early termination, and both parties have signed it off.

Describing the termination process

• Identify the conditions for terminating the agreement early - this could include a breach of contract, a change in circumstances, or a mutual agreement.
• Draft language that outlines the process for terminating the agreement, including any notification requirements and consequences of the termination.
• Be sure to include language that explains how to terminate the agreement in the event of a breach of contract, including the time frame for resolving the breach or the termination of the agreement.
• Include language that outlines the consequences of a breach, such as the return of any materials, payments, or other obligations.
• When complete, review the termination section to ensure that it is clear, concise, and legally compliant.

When you can check this off your list and move on to the next step:

• When the termination process is described in the agreement in a clear, concise, and legally compliant manner.

Addressing intellectual property rights

• Outline who owns the intellectual property (IP) created in the course of the agreement
• Include language that allows the parties to use the IP in the same manner as they use their own IP
• Ensure that both parties retain the rights to use the IP for their own purposes
• Cover who will have the right to sue if the IP is infringed upon
• Specify the length of the IP rights and any additional restrictions
• Include language that requires the parties to keep confidential any information related to the IP

When you have written out the IP language and both parties have agreed to it, you can check this off your list and move on to the next step.

Specifying who owns the IP

• Determine who should own the IP in the manufacturing agreement
• This could be the manufacturer, the customer, or a combination of both
• If the customer owns the IP, they may want to include a license agreement that allows the manufacturer to use the IP in the context of the manufacturing agreement
• Be sure to include any relevant clauses that specify the ownership of the IP in the manufacturing agreement
• You will know when you have completed this step when you have included clauses that adequately address the ownership of the IP in the manufacturing agreement.

Defining licensing terms

• Determine which party will own the intellectual property created during the manufacturing process
• Establish the scope of the license, including the length of the license and any restrictions
• Specify any royalties or fees associated with the license
• Outline any conditions or limitations on the transfer of the license
• Agree on a termination clause in the event either party breaches the agreement
• When complete, review the agreement to ensure all parties are in agreement with the licensing terms
• Once all parties agree to the licensing terms, the agreement is ready to be signed and finalized.

Establishing dispute resolution methods

• Identify the types of disputes that may arise from the agreement
• Negotiate and agree on a dispute resolution method that meets the needs of all parties
• Outline the details of the dispute resolution method, such as how it will be implemented and enforced
• Include a clause in the agreement that formalizes the dispute resolution method
• Once all parties have agreed to the dispute resolution method and have signed off on the clause, you can move on to outlining methods of dispute resolution in the next step.

Outlining methods of dispute resolution

• Consider the various methods of dispute resolution possible; arbitration, informal negotiation, and litigation are all options
• Determine which method(s) of dispute resolution are best to include in the agreement
• Draft the dispute resolution clause and include it in the agreement
• Make sure to include terms that provide guidance on how to initiate and conclude a dispute resolution process
• When the dispute resolution clause is drafted, included, and agreed upon, this step is complete and you can move on to the next step.

Establishing a timeline for resolution

• Establish a timeline for how long the parties will have to resolve any disputes arising from the agreement.
• Negotiate a timeline that is reasonable for both parties, and ensure that it is specified in the agreement itself.
• Once an agreed upon timeline has been established, you can move on to the next step.

Establishing confidentiality requirements

• Consider which types of confidential information will be shared between the parties
• Agree on the types of confidential information that must be kept secret
• Decide on a name for confidential information that will be shared
• Establish a process for handling confidential information
• Decide on a timeline for parties to review confidential information
• Establish a procedure for updating and maintaining confidential information
• Agree on how confidential information should be stored
• Decide how confidential information will be destroyed
• Agree on who can access confidential information

Once you have established the confidentiality requirements and documented them in the manufacturing agreement, you can check this off your list and move on to the next step.

Setting standards for sharing confidential information

• Establish protocols for sharing confidential information, such as who can access the information, how it should be shared, and what happens if the information is mishandled
• Create a list of confidential information that the parties are allowed to share with each other
• Consider any type of data that may be confidential, such as intellectual property, business plans, customer information, financial information, and more
• Set appropriate safeguards for handling confidential information, such as encryption, password protection, and other measures
• State that any confidential information shared between parties must be securely destroyed once it is no longer needed
• Once all protocols have been set, have both parties sign the manufacturing agreement

You’ll know that you have completed this step when you have established protocols for sharing confidential information, created a list of confidential information the parties are allowed to share with each other, set appropriate safeguards for handling confidential information, and stated that any confidential information shared between parties must be securely destroyed once it is no longer needed.

Defining the parameters for non-disclosure

• Outline the purpose of the agreement and what type of confidential information is to be shared
• Set the terms of non-disclosure, such as time frame, scope of information, and what is and isn’t to be disclosed
• Establish any exceptions to the non-disclosure agreement
• Clarify any sanctions that may be imposed if the terms of the agreement are broken
• Ensure both parties sign the agreement, and that each receives a copy

Once the terms of the non-disclosure agreement have been defined and agreed upon, you can move on to the next step of including a ‘hold harmless’ clause.

Including a ‘hold harmless’ clause

• Draft a clause that states that the manufacturer will not be held liable for any damages or losses incurred as a result of their services
• Include a clause that states the manufacturer will be held harmless if any third party claims arise due to the services provided
• Make sure the clause is specific to the services detailed in the agreement
• When you are satisfied with the hold harmless clause, you can check this step off your list and move on to the next step.

Defining the parties’ liability

• Identify the liabilities of each party in the agreement
• Specify the types of damages that are the responsibility of each party
• Outline the circumstances under which one party might assume the liability of another
• Define the terms of any insurance that is relevant to the agreement
• Ensure that the document is clear and unambiguous when it comes to liabilities
• Once all of these elements have been considered, you can move on to the next step.

Specifying which party is responsible for damages

• Create a clause that outlines which party is responsible for damages caused to the other party or third party due to any negligence or breach of contract
• Designate a party to be responsible for any damages caused to the other party or third party due to negligence or breach of contract
• Check that the clause includes a statement of liability and a clause that states who is responsible for damages
• Make sure that the clause in the agreement states each party’s liability and responsibility for damages
• Once complete, this step should be checked off your list, and you can move on to the next step of defining the governing law.

Defining the governing law

• Research the applicable laws for the agreement, taking into account the parties’ locations and any specific industry regulations that may also apply.
• If the parties wish to choose a specific governing law, such as the laws of a particular state or country, this should be included in the agreement.
• In addition, the agreement should specify whether the parties wish to agree to arbitration, mediation or some other form of dispute resolution.
• Once you have determined the applicable governing law and dispute resolution method, include these details in the agreement.

When you can check this off your list and move on to the next step:

• When the governing law and dispute resolution method have been determined and included in the agreement.

Identifying the jurisdiction and court system

• Identify the jurisdiction in which the parties are located to determine the governing court system
• Make sure the jurisdiction is one that is applicable to the parties in the manufacturing agreement
• Research the court system in the jurisdiction and make sure the parties are aware of the rules and regulations that pertain to the agreement
• Once the jurisdiction and court system have been identified, you can move on to the next step of specifying the governing law.

Specifying the governing law

• State which law will govern the agreement.
• Make sure to include choice of law and venue clauses for each party.
• Make sure each party has the ability to bring an action in the jurisdiction of the agreed governing law.
• When you have completed this step, you will have specified the governing law for the agreement.

Signing the agreement

• Make sure all parties have reviewed the agreement and are in agreement with the terms
• Set a date and time for the signing ceremony
• Make arrangements for all parties to come together in person or virtually to sign the agreement
• Have all parties sign the agreement on the agreed-upon date and time
• After all parties have signed the agreement, have a witness or notary sign the agreement
• Once all signatures have been obtained, make sure to keep a copy of the agreement for your records
• You can check off this step and move on to the next step when all signatures have been obtained and verified.

Scheduling a signing ceremony

• Contact the other party to schedule a time and place for the signing ceremony
• Agree on a time and place that is mutually convenient
• Confirm that all of the necessary parties will be present at the signing ceremony
• When the time and place has been agreed upon and all parties are confirmed to attend, check this off your list and move on to the next step of preparing and exchanging signed documents.

Preparing and exchanging signed documents

• Create a draft of the Manufacturing Agreement to be signed by both parties
• Exchange signed copies of the Agreement by email, fax, or in-person
• Confirm that both parties have received the signed copies and that they are identical to the original draft
• Check off this step when all signed copies have been exchanged and confirmed by both parties

FAQ

Q: What are the main components of a manufacturing agreement?

Asked by Mary on June 4th, 2022.
A: A manufacturing agreement is a legally binding contract between two or more parties to outline the terms and conditions of manufacturing goods for sale. The main components of a manufacturing agreement include the scope of work, the parties involved, payment terms, delivery terms, quality and safety requirements, dispute resolution clauses and warranties. Additionally, the manufacturing agreement should include clauses that protect the intellectual property rights of either party.

Q: Is a manufacturing agreement necessary?

Asked by John on August 28th, 2022.
A: A manufacturing agreement is usually necessary when there are two or more parties involved in the manufacturing process. It is an effective way to protect both the manufacturer and the buyer in case of any disputes that may arise during production or delivery of goods. Additionally, a manufacturing agreement can provide an effective framework for both parties to manage their respective roles in the production process.

Q: What are some common clauses included in a manufacturing agreement?

Asked by Sarah on April 15th, 2022.
A: Common clauses included in a manufacturing agreement include provisions for payment terms, delivery terms, quality and safety requirements, dispute resolution procedures and warranties. Additionally, depending on the nature of the agreement, certain intellectual property rights may need to be protected through specific clauses in the contract. It is important to ensure that all relevant legal requirements are met when drafting a manufacturing agreement.

Q: What should I consider when drafting a manufacturing agreement?

Asked by William on July 11th, 2022.
A: When drafting a manufacturing agreement it is important to consider all relevant legal requirements that may apply to your particular situation and jurisdiction. Additionally, you should be aware of any intellectual property rights that may need to be protected through specific clauses in the contract. It is also important to consider all relevant parties involved in the process and ensure that their roles and responsibilities are clearly outlined and agreed upon. Finally, it is important to consider payment terms, delivery terms, quality and safety requirements and any dispute resolution provisions that may be necessary for your particular situation.

Q: What is the difference between a supply contract and a manufacturing contract?

Asked by Elizabeth on December 5th, 2022.
A: A supply contract outlines the terms between two or more parties for the purchase and sale of goods or services whereas a manufacturing contract outlines the terms between two or more parties for the manufacture of goods or services. Generally speaking, a supply contract will contain fewer clauses than a manufacturing contract as it will usually only include provisions related to payment terms and delivery terms whereas a manufacturing contract will also include provisions related to quality control, safety requirements and dispute resolution procedures.

Q: How do I make sure my intellectual property rights are protected in a manufacturing agreement?

Asked by Joseph on October 19th, 2022.
A: When drafting a manufacturing agreement it is important to make sure all relevant intellectual property rights are protected through specific clauses in the contract. Depending on the nature of your business you may want to include clauses related to trade secrets such as confidential information, trademarks such as brand logos or symbols, patents such as inventions or designs or copyrights such as artistic works or software code. It is important to make sure these provisions are clear in order for them to be legally enforceable.

Q: How do I choose an appropriate jurisdiction for my manufacturing agreement?

Asked by Margaret on February 24th, 2022.
A: Choosing an appropriate jurisdiction for your manufacturing agreement depends on several factors such as where your business is based and where your manufacturer is located. Additionally you should consider any applicable laws or regulations that may apply in different jurisdictions such as those related to labour laws or environmental standards. It may be beneficial to seek legal advice when deciding which jurisdiction would best meet your needs as well as those of your manufacturer before drafting your manufacturing agreement.

Q: How do I ensure compliance with local laws when drafting my manufacturing agreement?

Asked by Michael on May 9th, 2022.
A: Compliance with local laws is essential when drafting any type of contractual document including a manufacturing agreement. Depending on where you are located you may need to include provisions related to labour laws or environmental standards among other things in your contract in order for it to comply with local laws. Additionally you should make sure that all relevant legal requirements for entering into an enforceable contract have been met before signing any agreements with your manufacturer.

Q: What is considered best practice when negotiating my manufacturing agreement?

Asked by David on November 24th ,2022
A: Best practice when negotiating any contractual document including a manufacturing agreement involves ensuring both parties understand their respective roles and responsibilities within the document as well as any applicable legal requirements which must be met before entering into an enforceable contract. Additionally both parties should make sure they understand any applicable intellectual property rights which must be protected through specific clauses within the document before agreeing upon any contractual obligations within their respective organizations.

Q: What risks should I consider when entering into a Manufacturing Agreement?

Asked by Lisa on September 6th ,2022
A: When entering into any kind of contractual document it is important to consider potential risks associated with non-compliance with local laws or failure to protect any applicable intellectual property rights through specific clauses within your document. Additionally you should consider potential disputes between yourself and your manufacturer regarding payment terms or delivery deadlines among other things before signing any agreements with them as this could have serious financial implications if not properly addressed within your document beforehand.

Example dispute

Suing a Manufacturer Over a Breach of Contract

• A plaintiff may raise a lawsuit against a manufacturer if the terms of a manufacturing agreement are not met.
• The lawsuit would reference the specific manufacturing agreement that was violated, and provide evidence that the manufacturer failed to comply with the terms of the agreement.
• The plaintiff must show that they were harmed as a result of the breach of contract.
• The plaintiff may seek to settle the lawsuit by requesting that the manufacturer comply with the terms of the agreement, or by seeking monetary damages to compensate for any losses caused by the breach.
• If the plaintiff successfully proves that the manufacturer breached the agreement, the court may award damages to the plaintiff. The amount of damages will depend on the severity of the breach and the extent of the harm caused by the breach.

Templates available (free to use)

Commercial Products Manufacturing Agreement
Development And Manufacturing Agreement
Exclusive Manufacturing Agreement
Standard Manufacturing Agreement

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