These Manufacturing Agreements
These manufacturing agreement templates provide a framework for a manufacturer and a customer to agree orders for the manufacture and supply of products.
These two agreements have been created for the situation where:
- the customer is specifying the product;
- the customer owns any intellectual property rights in the product;
- the manufacturer has been appointed to manufacture the product to that specification and that design; and
- the manufacturer will supply that product solely to the customer.
Both agreements include basic minimum order obligations.
They include an optional commitment to order and supply a defined quantity of products over the term of the agreement. In the premium agreement there is also a forecasting provision, which allows for periodic minimum quantities.
The ordering procedure is the same in both the standard and premium versions of this template. In summary the customer begins the process by issuing a "manufacturing request" document. The manufacturer responds to the request with a "manufacturing offer" document. This document constitutes a contractual offer. The customer then has a defined period within which to accept the offer and bring the order into force.
Prices and payment
The manufacturing agreements incorporate all the usual sorts of pricing and charges provisions. They include a clause on invoicing which specifies the period within which the customer must pay invoices that have been properly issued. They also include clauses covering VAT and other taxes, late payments, interest on late payments and the variation of prices.
Manufacturing arrangements often involve the sharing of sensitive information, and for this reason the documents both contain mutual confidentiality obligations. The definitions of confidential information used in the documents are relatively flexible, and the confidentiality clause itself includes all the usual exceptions.
Termination of manufacturing agreement
The agreement may be terminated by either party in defined circumstances. Optional provisions are included so that, in the event of termination, the customer may be required to purchase stock held by the manufacturer. The customer may also be required to purchase components or ingredients that have been purchased by the manufacturer with a view to meeting a minimum order requirement.
Terms and conditions of supply
The terms and conditions under which the products are actually supplied to the customer are set out in a schedule to each agreement. Those terms and conditions cover matters such as:
Premium vs standard manufacturing agreement
- the manner of delivery of the products to the customer or collection of the products by the customer;
- the passage of risk in the products from the manufacturer to the customer;
- the passage of title to - that is, ownership of - the products from the manufacturer to the customer;
- product related warranties; and
- certain terms regarding the breach of those warranties.
There are a number of significant differences between the premium and standard versions of this document.
As noted above, the premium version includes forecasting provisions allowing for the issuance of periodic forecasts by the customer, which the manufacturer can use to guide its purchasing and planning.
The premium document includes provisions covering the supply by the customer of components or ingredients for the products, and the supply by the customer of equipment to be used in the manufacturer of the products. The equipment remains in the ownership of the customer, and would be returned upon termination of the agreement.
The premium document also includes clauses covering:
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- improvements made to the products or the manufacturing process;
- publicity around the agreement itself;
- design services and training services provided by the customer to the manufacturer; and
- a more detailed indemnity clauses.