How to Write a Supply Agreement?
A supply agreement is a legal agreement that denotes the promise of a seller to supply specified goods or services that a buyer needs. It also states the fixed price of the provided product or services and the buyer agreeing to it exclusively to the seller. Goods can be in food, manufacture, equipment, or water form depending on the clientele's needs. There are other agreements like profit agreement and credit agreement that can be associated with the supply agreement.
A supply agreement serves as a lifeblood of the business. This contract serves as a key framework to meet the demands of the market. In that case, it must be favorable in both supplier and buyer. The client must have the knowledge as to what to expect in the goods and how its distribution would be. In return, suppliers must also be aware of the expectations of the client and how would the payment took place. If you wanted a supply agreement, here are some tips on how to write a master agreement.
1. Assess Fair Price
When it comes to money agreement, all must be fair and square. Fair pricing of goods is crucial in every transaction. Usually, the market will have a big effect on the price. This would allow investors to make transactions to underlying communities that do not involve the direct market. By basing the cost in the market, fairness will dominate by providing costs based on what others pay for the same material. If you are a buyer that does not have enough money to pay the goods, you can propose a credit agreement toward your supplier.
2. Be Exclusive
Loyalty is a bonus especially for the customers as it allows the supplier to trust them, and as a result, they can consider discounts and a guarantee of your goods. But be careful because it might also be advantageous as incidents might happen that can cause chain problems like your relationship with the supplier. It is advisable that you carefully and thoroughly read the service agreement and make sure that legal actions are indicated before signing it.
3. Accept Denial of Goods
As a supplier, expect that there would be consequences of delivering incorrect, lacking, or damaged products. Buyers have the right to reject an unsatisfactory product. But there are circumstances that the buyer will notice the defects months after the purchase. To console with that, you can refer to your supply purchase agreement or term sheet for it and check if the time of the rejection product is within the time frame of the warranty and or how to compensate or replace it.
4. Propose an Exit Plan
You cannot risk your future with just mere executing, you need to have a plan. Thinking about possibilities, you need to formulate your own exit plan if ever circumstances will occur. Provide conditions for termination that are reasonable and acceptable. Consider some guide questions like the effect of the contract termination, contingency plans, and holds the responsibility for the damage cost. In that way, both parties can secure themselves and their business.