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Given the current landscape where global supply chain challenges continue to impact businesses in 2025, many companies still experience shipping delays and occasional product shortages. Although the worst of the COVID‐19 crisis has largely abated, new factors-ranging from geopolitical uncertainties to climate‐induced disruptions-mean that being on top of your supply agreement is more important than ever. A well‐drafted supply agreement can help you mitigate these risks and steer your business through rocky times.
What Is A Supply Agreement?
A Supply Agreement is a legally binding contract that clearly outlines the arrangements between a supplier (the party providing the goods) and a purchaser (the party receiving the goods in exchange for payment). It sets out the rights, responsibilities, and remedies available to both sides.
Businesses across a broad spectrum rely on these agreements, so it is essential that the specific roles and responsibilities agreed upon by you and your supplier are accurately reflected, tailored to the unique needs of your operations.
Your supply agreement not only protects your purchases-ensuring that you receive the correct goods on time-but also safeguards valuable business assets. For further insight into the benefits, do check out our article on why you should have a supply agreement.
In terms of tackling supply chain and shipping issues, the following components of the agreement are extremely useful:
- Clear conditions to ensure timely performance and address delay issues
- Protections related to product design, including intellectual property, confidentiality, and exclusivity
- Obligations regarding product quality and liability for damages incurred during manufacturing or shipping
- Agreements defining the price and payment process
- Clauses setting out the contract duration and termination rights
- A detailed process for resolving disputes
Potential Issues You Could Solve Using A Supply Agreement
Below are a few examples of challenges and how an appropriately drafted supply agreement can address them:
1. Delays In Receiving Or Non-Provision Of Goods By The Supplier
Consider a scenario where your customers have placed orders, but your supplier fails to deliver the goods as scheduled. What options do you have?
A carefully drafted supply agreement provides several remedies in such cases by setting out clear obligations on the supplier. These remedies typically relate to contractual performance and include measures to prevent delays.
Remember, it is equally important to communicate with your customers to understand their priorities before deciding on a course of action as specified in your agreement.
Contractual Performance Clauses
If a supplier fails to meet their contractual obligations, your supply agreement can offer protections such as:
- Rights to terminate the contract
- Entitlement to claim damages for non-performance
- Performance guarantees from the supplier’s shareholders or parent company
- Requirement for performance bonds
This list is not exhaustive; the specific clauses will depend on your circumstances. Consider whether you wish to maintain the supplier relationship or simply recover your losses when deciding which remedies to include. Ultimately, the effectiveness of these measures hinges on how accurately they are drafted in your agreement.
Delay Clauses
It is prudent to build in generous lead times given the ongoing global challenges in 2025. While the acute phase of COVID‐19 is behind us, other disruptions can still cause delays.
Key materials should be ordered well in advance, and your agreement can deter unnecessary delays by stipulating financial penalties payable by the supplier, or even granting you the right to terminate the contract if delays become excessive. If your supplier is unable to perform due to unforeseen global disruptions, including residual effects of COVID‐19, here are some suggestions to consider.
2. Intellectual Property and Confidential Information
If you are concerned that counterfeit versions of your product might emerge or that sensitive business information could be leaked during the supply chain process, robust intellectual property and confidentiality provisions in your agreement can offer significant protection.
These elements are vital to your competitive advantage, so it is crucial that they are safeguarded when working with third-party suppliers. Proper clauses in the supply agreement will encourage your supplier to exercise extra caution in protecting your business assets.
Intellectual Property
Your trademarks, copyrights, designs, and patents should be registered with the relevant authorities to secure legal protection. Additionally, including damages clauses in your supply agreement incentivises your supplier not to misuse your intellectual property. This acts as a penalty for any breach and may also grant you the right to seek an injunction, compelling your supplier to cease any infringing activities. For further guidance on protecting your intellectual property, please refer to our Intellectual Property Protection page.
Confidentiality
Your business’s confidential information-such as trade secrets, pricing strategies, and client details-needs to be clearly defined and protected within the agreement. This may involve requiring your supplier to sign a Non-Disclosure Agreement and incorporating robust confidentiality clauses. For further insights, do check out our guide to confidentiality clauses to see the best practices for limiting access to sensitive information.
Intellectual property and confidentiality are complex areas, so ensuring that the language in your agreement is precise and comprehensive is essential to protect your business interests.
3. Agreeing on Orders, Delivery, Price and Payment
It is vital to be deliberate and specific about what you are purchasing from your supplier, including the price, delivery processes, and payment terms.
Price and Product
A detailed description of the goods and their associated price is necessary to avoid any confusion between you and your supplier. This clarity helps ensure that both parties have the same expectations.
Orders
Exclusivity
Exclusivity clauses may restrict your supplier from providing the same or similar goods to competing businesses in your area, thereby helping you maintain a competitive edge.
Defects
In cases where defective goods are delivered, your agreement should stipulate the process for obtaining a refund or replacement. It should also clearly state the timeframe within which you must notify the supplier of any defects.
Furthermore, you can specify minimum quality requirements based on industry standards, and determine whether sample approvals or inspections are required before full-scale manufacturing commences.
Title and Security
It is crucial to determine when ownership of the goods transfers from the supplier to you, and at what point liability for the goods passes. For example, you might agree that the supplier retains liability until delivery is completed, after which the responsibility shifts to you. Ensure these provisions accurately reflect your intentions.
Delivery
Delivery arrangements should include specifics on quantities, locations, dates, and delivery methods. This may also encompass requirements such as minimum order quantities or special transport conditions (e.g. refrigeration). Any pre-delivery inspection procedures should be clearly detailed in the agreement.
Payment
Clearly defining the payment schedule in your supply agreement is crucial. One effective method is a 50/50 payment split-where half of the payment is made upon receipt and approval of samples, and the remaining half upon final delivery. In 2025, staggered payment terms are increasingly recognised as best practice to mitigate risks associated with delayed or non-delivery.
4. Agreement Term and Conclusion
It is important to consider the duration of your supplier relationship and what exit options are available should your requirements change or issues arise.
Term
The length of the agreement should be clearly specified. Whether you opt for a one-year arrangement, a longer-term partnership, or a one-off contract, flexibility in the term can help you navigate the evolving market conditions of 2025.
Termination
Beyond issues like delays or non-performance, there may be various circumstances that justify termination of the agreement. Being explicit about the conditions under which you can exit the agreement is crucial. For additional guidance on drafting effective termination clauses, our team is available to assist with contract review and redrafting services.
5. Dispute Settlement
Dispute settlement clauses outline how disagreements between you and your supplier will be resolved. Whether disputes arise from delivery delays, product defects, or other contractual breaches, having a clear procedure in place is essential. Typically, a dispute settlement clause addresses two main components:
- A detailed description of the communication process between the parties, including the issuance of formal notices
- Specified actions that the parties must take, such as mediation, arbitration, or, if necessary, legal proceedings
Communication
This involves stipulating whether a formal notice is required to detail the issues and propose remedial steps. Such written communication not only facilitates resolution but also serves as evidence that all reasonable efforts were made prior to commencing legal proceedings.
Actions
The clause should also specify the methods available for dispute resolution-whether through arbitration, mediation, or direct negotiations. Given that legal proceedings remain costly in 2025, limiting the jurisdiction or conditions under which a party can initiate a lawsuit can offer significant financial protection. Always consider whether preserving the business relationship is preferable to an outright legal battle.
Our expert contract lawyers are well-versed in drafting dispute resolution clauses that are both robust and flexible, ensuring that your interests are protected while promoting amicable solutions.
Our Supply Agreements
Supply agreements encompass many facets that must be tailored to suit your specific situation. In an era marked by ongoing supply chain disruptions and evolving market conditions, a regularly updated and comprehensive agreement is essential to protecting your business.
We understand that navigating the complexities of contractual agreements can be overwhelming. Whether you need assistance reviewing an existing Supply Agreement or require help drafting one from scratch, our team of expert contract lawyers is here to support you. Let us know how we can help! If you’re unsure about what terms to include or where to begin, please contact [email protected] or call us on 08081347754 for a free, no obligation chat.
In 2025, staying ahead of supply chain challenges demands not only agility but also a proactive approach to contractual protection. Regularly reviewing and updating your supply agreements ensures that they remain aligned with current industry standards and market realities, giving your business the confidence and competitive edge it needs.
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