What to Watch Out For In Your Supply Agreement

Note: Want to skip the guide and go straight to the free templates? No problem - scroll to the bottom.
Also note: This is not legal advice.

Introduction

Supply agreements are essential documents for businesses, entrepreneurs, and buyers looking to make or receive a transaction; they provide legal protection, minimize risk, and ensure everyone gets the best deal possible. But what should you include in your supply agreement? Here’s what the Genie AI team has to say on the matter.

Firstly, when creating a supply agreement it is important to be clear about what is being supplied - from product type and quantity to price, payment terms and delivery schedules. Dispute resolution provisions like arbitration or mediation should also be included in case anything goes wrong. Intellectual property rights must also be addressed - ensuring that no company can claim ownership of intellectual property that belongs to another party. Finally, it is crucial that any supply agreement includes a termination clause outlining both parties’ obligations if the transaction ends early.

At Genie AI we believe having access to qualified guidance during this process is invaluable; which is why our open source community template library exists – providing high quality legal documents without needing lawyer fees! Our step-by-step guidance provides users with all they need know about creating an effective supply agreement as well as how to access our free template library today – so read on for more information!

Definitions (feel free to skip)

Legal names and addresses: The exact name and address of each party involved in an agreement. It is important to ensure they are accurate and up to date.
Legal representatives: The name, title, and contact details of each party’s legal representative.
Obligations: The duties each party has to complete as part of an agreement.
Outcomes: The desired results of an agreement.
Quantities and specifications: The amount and details of the goods or services to be provided within an agreement.
Delivery schedules: The dates by which goods or services need to be delivered.
Payment terms: The frequency, amounts, discounts, incentives and fees for payments within an agreement.
Warranties: Promises by one party that the goods or services provided will meet certain standards.
Indemnities: Legal protection against liabilities.
Termination terms: The conditions under which an agreement can be ended.
Renewal terms: The conditions under which an agreement can be renewed.
Dispute resolution: The process used to resolve any disagreements that arise during the course of an agreement.
Governing laws: The laws and regulations applicable to an agreement.
Jurisdiction: The court or area in which a dispute will be heard.
Intellectual property: Rights over the ownership and use of creative works, inventions, and ideas.

Contents

• Identifying the parties involved in the agreement
• Establishing the legal names and addresses of each party
• Establishing the legal representatives of each party
• Establishing the scope and purpose of the agreement
• Defining the specific obligations of each party
• Defining the desired outcomes of the agreement
• Defining the goods or services that are to be supplied
• Establishing descriptions, quantities and specifications of goods and services
• Establishing any requirements for goods or services to be provided
• Establishing deadlines and delivery schedules
• Setting out due dates for delivery of goods or services
• Establishing any required progress reports
• Setting out payment terms and conditions
• Defining the payment frequency and amounts
• Specifying any discounts or incentives for early payments
• Setting out any fees and interest for late payments
• Clarifying any warranties or indemnities
• Defining any warranties of quality or performance
• Determining any contingent liabilities or indemnities
• Outlining the termination and renewal terms
• Defining the conditions under which the agreement can be terminated
• Establishing any renewal periods or procedures
• Providing dispute resolution options
• Establishing the process for resolving any disputes
• Establishing the grounds for dispute resolution
• Determining applicable law and jurisdiction
• Specifying the governing laws for the agreement
• Identifying the jurisdiction for any disputes
• Considering intellectual property rights
• Establishing who owns the rights to any intellectual property created under the agreement
• Establishing any restrictions or limits on the use of the intellectual property

Get started

Identifying the parties involved in the agreement

• Read through the agreement and make sure you know who is a party to the agreement
• Make sure each party is easily identifiable and distinguishable in the agreement
• Confirm that all parties to the agreement have been listed and that there are no missing parties
• Check that the agreement states that all parties have the legal capacity to enter into the agreement
• Once you have identified all the parties involved in the agreement, you are ready to move on to the next step.

Establishing the legal names and addresses of each party

• Confirm the legal name and address of each party, as these will be used throughout the agreement
• Obtain a copy of the company registration documents for each party and verify that the name and address matches what is listed in the agreement
• Ensure that the legal names and addresses of the parties are clearly stated in the agreement
• Once you have confirmed all the legal names and addresses are correct, you can move on to the next step: Establishing the legal representatives of each party.

Establishing the legal representatives of each party

• Make sure that each party’s legal representative is named in the agreement
• Ensure that each legal representative is authorized to sign the agreement
• Check that each legal representative is listed with their correct title and contact information
• Confirm that each representative has the authority to bind their company to the agreement
• Once all legal representatives have been identified and authorized, you can move on to the next step in the supply agreement.

Establishing the scope and purpose of the agreement

• Clearly define the scope of the agreement and the purpose of the agreement for both parties
• Identify the specific products, services or goods that are included in the agreement
• Outline the specific duration of the agreement, including any renewals and termination dates
• Establish any payment terms and conditions
• Specify what happens in the event of a breach or dispute
• When all of the above points are established and agreed upon, check this step off your list and move on to the next step.

Defining the specific obligations of each party

• Specify the exact terms of the agreement, such as the types of goods/services to be supplied, the delivery method, and the payment terms
• Outline any additional requirements such as warranties, quality standards, and the consequences of any failure to meet those standards
• Identify the roles, responsibilities, and liabilities of each party
• Include provisions for indemnification, confidential information, and dispute resolution
• Be sure to include any specific federal, state, and local laws or regulations that apply to the agreement
• Make sure to use clear and precise language that can be easily understood by all parties

You’ll know that you’ve completed this step when you have a clear and detailed agreement that outlines the obligations of each party.

Defining the desired outcomes of the agreement

• Identify the goals of both parties in the agreement
• Make sure that the goals are stated clearly and quantifiably
• Outline the expected performance outcomes of both parties in the agreement
• Address any potential dispute resolution methods
• Have both parties sign the agreement to make it legally binding
• Ensure that all the desired outcomes of the agreement have been covered
• When all desired outcomes have been outlined, the parties can move on to the next step of the process.

Defining the goods or services that are to be supplied

• Clearly outline all goods and services that are to be supplied in the agreement
• Ensure that the specific goods and services are described in adequate detail
• Include any accessories and/or parts necessary to make the goods and services functional
• Set out any warranties or guarantees that the supplier will provide for the goods and services
• Include terms for delivery and installation or setup, if applicable
• When the list of goods and services is complete and agreed upon, this step can be considered finished.

Establishing descriptions, quantities and specifications of goods and services

• Include a detailed description of the goods or services to be supplied, including any specifications, quantities and any other requirements
• Establish how both parties will identify and agree on the quality and quantity of goods or services supplied
• Determine who will be responsible for any testing and acceptance criteria or procedures
• Outline any specific requirements for packaging, labeling and delivery of goods
• Set forth any additional requirements, such as warranties and certifications
• Specify any related services to be provided, such as installation and maintenance
• When complete, you should have a clear understanding of the terms of the goods or services to be supplied and the process for evaluating them.

Establishing any requirements for goods or services to be provided

• Consider the requirements that you would like the supplier to meet in providing the goods or services, such as the quality of the goods or services, the time frame for providing the goods or services, and any other requirements.
• Make sure to list out each of these requirements in the agreement.
• Consider the potential consequences of any breach of these requirements and make sure to include these in the agreement.
• If any of the requirements are not clearly laid out in the agreement, then it should be included in the agreement in order to ensure that both parties have a clear understanding of the expectations for the goods or services.
• Once you have listed out all the necessary requirements for the goods or services to be provided, you can check this off your list and move on to the next step.

Establishing deadlines and delivery schedules

• Clearly state the dates for when goods and services need to be delivered
• Make sure that the delivery date is realistic and achievable for both parties
• If the delivery date is not met, discuss potential consequences
• Document any agreed-upon changes to the delivery date
• Once all deadlines and delivery schedules are established, you can move on to the next step.

Setting out due dates for delivery of goods or services

• Ensure that the due date for delivery of goods or services is specified in the agreement
• Make sure that the due date is reasonable and achievable
• Ensure that the agreement states who is responsible for meeting the due date
• Consider the need for any additional time for quality assurance or other purposes
• Check that any penalties for late delivery are reasonable
• When all the information has been correctly included in the contract, you can move on to the next step of establishing any required progress reports.

Establishing any required progress reports

• Identify what progress reports are required and who is responsible for providing them
• Establish a timeline for when progress reports should be provided and by whom
• Outline what information should be included in the progress reports
• Specify the format and method of delivery for the progress reports
• Determine a mechanism to review the progress reports and address any issues that arise
• When all these details have been established, you can check this off your list and move on to the next step: setting out payment terms and conditions.

Setting out payment terms and conditions

• Determine the payment schedule and payment amounts in the contract
• List any late payment fees and penalties
• Create a section outlining any additional fees or charges
• Establish any discounts or incentives for early payment
• Include any applicable taxes and insurance requirements
• Specify the currency for payments
• Specify the payment method (e.g. wire transfer, credit card, etc.)

Once all of the above items have been included in the agreement, you can move on to the next step.

Defining the payment frequency and amounts

• Make sure the supply agreement clearly outlines how often you will pay your supplier (e.g. weekly, monthly, quarterly, etc.)
• Specify the exact amounts that are to be paid and when they are due
• Make sure to specify any discounts or incentives you may offer for early payments
• Check to make sure that any payment terms and conditions you have outlined in the agreement are also reflected in the payment frequency and amounts
• Once you have checked off these points, you can move on to specifying any discounts or incentives for early payments in the next step.

Specifying any discounts or incentives for early payments

• Check for any discounts or incentives that may be offered for early payments
• Specify in detail any discounts or incentives that will be provided for early payments in the agreement
• Make sure the agreement outlines any applicable payment terms, such as the amount of the discount and when it will be applied
• Ensure that the agreement also includes a clause that allows the supplier to terminate any discounts or incentives if the payment terms are not met
• Once you have reviewed the agreement and made sure that any discounts and incentives for early payments are properly specified, you can move on to the next step.

Setting out any fees and interest for late payments

• Review the agreement to determine whether any fees and interest for late payments are outlined
• Check the fees and interest to make sure they are reasonable for both parties
• Ensure that the agreement states how any fees and interest for late payments will be calculated
• Make sure that the agreement states that late payments will not be waived
• Confirm that the agreement sets out the time period before late payments begin to accrue
• Make sure that the agreement also states any deadlines for late payments
• Once all of these points have been addressed, you can move on to the next step, clarifying any warranties or indemnities.

Clarifying any warranties or indemnities

• Review and confirm all warranties and indemnities in the supply agreement
• Understand what you are liable for in the event of a breach of warranty
• Ensure that all warranties and indemnities are explicit and clearly stated in the agreement
• Make sure that the agreement states that the supplier is solely responsible for any breaches of warranty
• Ensure that you are not liable for loss or damage caused by the supplier’s breach of warranty
• When finished, check off this step and move on to the next step of defining any warranties of quality or performance.

Defining any warranties of quality or performance

• Review the agreement to ensure that any warranties of quality or performance are clearly defined
• Look for language that outlines any specific performance requirements, standards, or specifications
• Check to see whether any specific end-user or customer requirements are addressed in the agreement
• Ensure that the agreement outlines the circumstances in which the warranties of quality or performance may be voided
• Once you have reviewed the agreement and confirmed that warranties of quality and performance are clearly defined, you can move on to the next step.

Determining any contingent liabilities or indemnities

• Review the agreement to determine if any contingent liabilities are present
• Identify any indemnities that may be in place and review the conditions of each
• Check for any warranties or guarantees that could require payment if breached
• Be aware of any additional risks that could be associated with the agreement
• Make sure that all risks are clearly stated in the agreement

Once you have reviewed the agreement and identified any contingent liabilities or indemnities, you can check this off your list and move on to the next step.

Outlining the termination and renewal terms

• Review the termination and renewal terms of your supply agreement to ensure that the obligations of each party are clearly defined
• Pay close attention to the specifics of the renewal terms - this will determine the length of time you are bound to the terms of the agreement
• Check that the agreement states the process for how and when a party can terminate the agreement
• Consider if you want to include a clause about a minimum notice period for termination
• Make sure that the agreement states the process for how and when the agreement can be renewed
• If you are able to negotiate a renewal term, decide if you want to include any conditions or limitations
• Once you are satisfied with the termination and renewal terms, you can check this off your list and move on to the next step.

Defining the conditions under which the agreement can be terminated

• Review the termination clause of your supply agreement to ensure that it clearly defines the conditions that will trigger the termination of the agreement
• Make sure that the agreement includes the circumstances that could lead to early termination, such as failure to meet performance standards or a breach of contract
• Ensure that the agreement outlines any remedies that would be available to the party that terminates the agreement
• Include specific language that confirms that the terminating party has the right to recover any costs or expenses incurred as a result of the termination
• Verify that the agreement stipulates the date when the termination will be effective
• Ensure that the termination clause outlines any consequences or liabilities that will be imposed on either party as a result of the termination

You can check this off your list and move on to the next step once you have reviewed the termination clause of your supply agreement and ensured that it meets all of the aforementioned requirements.

Establishing any renewal periods or procedures

• Consider how long the agreement will last and whether any renewal periods should be included.
• Decide whether the agreement is intended to automatically renew or if some form of confirmation or renewal notice is required.
• Specify when and how any renewal period should be triggered.
• Make sure to include any required notice periods that must be given prior to the expiration of the agreement.
• When you have established renewal periods or procedures, check it off your list and move on to the next step.

Providing dispute resolution options

• Ensure that the agreement includes provisions for resolving disputes between the parties, such as arbitration or mediation
• Consider whether the agreement should contain provisions allowing the parties to refer a dispute to a court if the dispute cannot be resolved through arbitration or mediation
• Decide what type of dispute resolution process should be included in the agreement, such as binding arbitration or non-binding mediation
• When the agreement is signed, you can move on to the next step, which is Establishing the process for resolving any disputes.

Establishing the process for resolving any disputes

• Research and understand the different dispute resolution options available, such as litigation, arbitration, and mediation
• Decide which of these options will work best for your specific agreement
• Include clear language in the agreement that outlines the process for resolving any disputes
• Ensure that the chosen dispute resolution process is explained in detail
• Set out a timeline for when the dispute resolution process will begin and end
• Include a clause that requires both parties to be responsible for the costs associated with the dispute resolution process
• When you have this step complete, make sure you have a clear understanding of what the dispute resolution process will look like and that it is included in the supply agreement.

Establishing the grounds for dispute resolution

• Identify the type of dispute resolution you want to use, such as arbitration, litigation, or mediation
• Decide whether the dispute resolution will be binding or non-binding
• Clarify the rules of engagement for the dispute resolution process, such as the number of representatives allowed and the timeframe for reaching a resolution
• Note any additional costs to be paid by either party, such as the cost of using a mediator
• Include a clause to identify the governing body or authority that will oversee the dispute resolution process

When you have included all of the above elements in your supply agreement, you can check this step off your list and move on to the next step, which is determining applicable law and jurisdiction.

Determining applicable law and jurisdiction

• Identify the governing laws for the agreement. This includes the laws of the country or state where the supplier is located, as well as any laws that may be applicable to the agreement.
• Look at the dispute resolution clause to determine which laws will be applied in the event of a dispute.
• Make sure that the relevant law is specified in the agreement and that the parties are in agreement about which law will be applied.
• Ensure that the agreement stipulates which court or other body will have jurisdiction in the event of a dispute.
• After determining applicable law and jurisdiction, make sure to review the agreement to make sure that it is compliant with any relevant law or regulation.

Once you have identified the applicable law and jurisdiction, you can move on to the next step: specifying the governing laws for the agreement.

Specifying the governing laws for the agreement

• Identify the governing law for the agreement.
• Make sure the governing law is appropriate for all parties involved.
• Include a clause in the agreement that explicitly states the governing law.
• Consider the enforceability of the agreement, and applicable court jurisdiction in the event of a dispute.
• Once these steps are completed, this step in the guide can be checked off and you can move on to the next step.

Identifying the jurisdiction for any disputes

• Determine the jurisdiction in which the parties will resolve any disputes or disagreements
• Consider various factors such as the location of the parties, the nature of the agreement, the applicable law, and any other relevant factors
• Include in the agreement a clause that states the parties’ agreement on the jurisdiction for resolving any disputes
• Make sure to note the jurisdiction of the courts that will handle the dispute resolution
• When determining the jurisdiction, consider the impact of the chosen jurisdiction on any future legal proceedings
• Once you have identified the jurisdiction for any disputes, make sure to include it in the agreement and check it off your list to move on to the next step.

Considering intellectual property rights

• Ensure that the agreement outlines who will own the intellectual property rights created or used as part of the supply agreement
• Make sure the agreement defines which party is responsible for protecting and maintaining the intellectual property rights
• Confirm that the agreement outlines what each party can and cannot do with the intellectual property rights
• Check that the agreement states the time period for which the intellectual property rights will be in effect
• When you have confirmed that the agreement covers all rights to the intellectual property, you can move on to the next step.

Establishing who owns the rights to any intellectual property created under the agreement

• Review the language in your supply agreement to determine who owns any intellectual property created under the agreement.
• Consider if the agreement states whether the rights are transferable to another party.
• Make sure that the agreement clearly states the ownership rights of the intellectual property created under the agreement.
• Be aware of any restrictions on the use or transfer of the intellectual property and make sure these are clearly stated in the agreement.
• Once you have established who owns the rights to any intellectual property created under the agreement, you can check this off your list and move on to the next step.

Establishing any restrictions or limits on the use of the intellectual property

• Review the agreement to determine if there are any restrictions or limits on the use of the intellectual property
• Make sure the agreement states that the supplier has the right to control the use of any intellectual property created under the agreement
• Ensure that the agreement states that the supplier will have the right to terminate the agreement if the intellectual property is used in any way that is contrary to the agreement
• Ensure that the agreement states that any use of the intellectual property outside of the scope of the agreement requires the supplier’s prior written consent
• Once you have reviewed the agreement and confirmed that the supplier has the right to control the use of the intellectual property, you can check this step off your list and move on to the next step.

FAQ:

Q: What other areas of knowledge should I be aware of when reviewing a supply agreement?

Asked by Marie on April 25th, 2022.
A: It is important to have an understanding of the legal, financial and practical considerations that come into play when reviewing a supply agreement. Not only is it important to understand the legal implications of each clause in the agreement, but also the potential financial implications. Additionally, it is important to consider the practical implications of a supply agreement; including potential delivery timescales, payment terms and insurance requirements.

Q: What are the key points to consider when negotiating a supply agreement?

Asked by Robert on August 2nd, 2022.
A: When negotiating a supply agreement there are several key points to consider. Firstly, it is important to ensure that both parties are clear on what will be supplied and the terms under which it will be supplied. Secondly, it is important to agree upon payment terms that best suit both parties, as well as any other terms such as delivery schedules, warranties and insurance requirements. Finally, it is important to understand the legal implications of each clause in the agreement and ensure that all parties are happy with them before signing.

Q: How do I ensure that my rights are protected in a supply agreement?

Asked by Jessica on December 21st, 2022.
A: It is important to ensure that all of your rights are protected in a supply agreement by carefully reviewing each clause in the agreement and ensuring that you understand the legal implications of each clause. In addition, you should negotiate with the supplier to ensure that any terms that are not favorable to you are amended or removed from the agreement. Finally, it is important to ensure that all parties sign off on the agreement before any goods or services are exchanged.

Q: What considerations should I make if I am entering into a supply agreement with an international supplier?

Asked by John on June 8th, 2022.
A: When entering into a supply agreement with an international supplier there are several considerations to make. Firstly, it is important to ensure that you understand any local laws or regulations that may apply in the country where you are operating. Secondly, you should ensure that both parties agree upon which jurisdiction’s laws govern the agreement in order to avoid any potential disputes over legal matters. Additionally, you should consider any potential delivery or payment issues which may arise due to different time zones or currencies. Finally, you should also consider any potential language barriers which could affect communication between both parties.

Example dispute

Lawsuits Involving Supply Agreement

• A plaintiff may raise a lawsuit that references a supply agreement if they believe that the terms of the supply agreement have been breached.
• The plaintiff must be able to prove that they have suffered damages as a result of the breach in order to win the lawsuit.
• The plaintiff must provide evidence of the breach of the supply agreement, such as evidence of the other party’s failure to deliver goods or services as agreed or any other terms that have been violated.
• The plaintiff must also provide evidence of the damages suffered as a result of the breach, such as lost profits, increased costs, or any other costs that have been incurred.
• The plaintiff can also seek to recover any court costs associated with the lawsuit in addition to any damages.
• The court may also award the plaintiff damages in the form of punitive damages if the breach of the supply agreement was done in bad faith or with malice.
• Settlement may be reached outside of court, where the two parties can come to an agreement on the damages owed, and the plaintiff can waive the right to further action.
• Alternatively, the court may make a ruling on the damages owed by either party if the case goes to trial.

Templates available (free to use)

Development And Supply Agreement
Exclusive Supply Agreement
Fuel Supply Agreement
Global Supply Agreement
Long Term Supply Agreement
Master Development And Supply Agreement
Master Supply Agreement
Milk Supply Agreement
Product Supply Agreement
Purchase And Supply Agreement
Simple One Off Or Serial Entertainment Services Supply Agreement
Strategic Supply Agreement

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