Sample Supply Chain Agreement

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Party 1

Name / Company
Individual / Company
Address 1
Address 2
City
State/Province
Zip

Party 2

Name / Company
Individual / Company
Address 1
Address 2
City
State/Province
Zip
What is the effective date for this contract?
A "Contract Year" indicates what dates start and end the year used to project forecasts.

Party 1:
Party 2:
DEFINITION - CONTRACT YEAR - When should the Contract Year begin and end?
Beginning date:
End date:
Many times, the customer wants to make clear that the "Facility" is stated at a specific address in the Agreement, so that any relocation of the Facility later is approved by the customer to ensure that quality requirements will still be met.

Party 1:
Party 2:
FACILITY - What is the address of the Facility where the Deliverables are manufactured?
"Deliverables" are the tangible goods or intellectual property provided under an agreement for payment. "Services" are not goods or deliverables, which are the tangible results of the services. For example, if a consultant is engaged to meet with and better understand a customer's manufacturing system and then provide a written report summarizing how to improve the system, the meeting and understanding would be the services, while the report itself would be a deliverable.

Party 1:
Party 2:
DELIVERABLES (Party-1 Sells) - What are the Deliverables Party-1 will provide pursuant to this Agreement?
A "Forecast" is a document that is an estimate of how many Deliverables the customer wants to buy from the vendor within a particular time frame, and the vendor usually represents that it will be able to supply the forecasted amount of Deliverables. A "Purchase Order" is a document that is an actual order (not an estimate) for Deliverables, listing the Deliverable type, quantity and delivery date.

Party 1:
Party 2:
FORECASTS AND PURCHASE ORDERS (Party-1 Sells) - How often do I want to issue forecasts and purchase orders?
Please specify the Deliverable amounts for each Quarter/Calendar Year during the Term.
Purchase Order timing.
How many days for delivery?
How many days for delivery?
How many days for delivery?
How many days for delivery?
"Exclusivity" or a "Requirements Contract" means that the customer must only purchase a certain kind of Deliverable from the vendor (and not from anyone else) while the Agreement is in effect.

Party 1:
Party 2:
EXCLUSIVITY (Party-1 Sells) - Does Party-2 have to exclusively purchase the Deliverables from Party-1?
Can Party-2 buy other products similar to the Deliverables?
Please describe the products similar to the Deliverables.
"Shelf Life" means how long the Deliverables will last before they expire.

Party 1:
Party 2:
SHELF LIFE - How long is the shelf life for the Deliverables?
Once a customer takes ownership and title to goods, if the goods are damaged or lost, then that becomes the customer's responsibility. Because of these consequences, the parties usually discuss and agree on the point where ownership, title and risk of loss are transferred to the customer. "Acceptance" is the point after the customer receives the Deliverables and has concluded that the Deliverables comply with the Agreement's requirements.

Party 1:
Party 2:
OWNERSHIP, TITLE AND RISK OF LOSS (Deliverables) (Party-1 Sells) - At what point does ownership, title and risk of loss transfer to the customer?
A fee in this context can take many forms, including a flat fee, the total of the hours/days incurred times the hourly/daily rates, a guaranteed maximum fee, a per Service/Deliverable fee, a per milestone fee, or other arrangement.

Party 1:
Party 2:
FEE (Services/Deliverables) (Party-1 Sells) - What are the fees?
What is the flat fee?
What is the hourly rate for each member of Party-1's personnel?
What is the daily rate for each member of Party-1's personnel?
What is the maximum flat fee?
Hourly rate fee or daily rate fee?
What is the hourly rate for each member of Party-1's personnel?
What is the daily rate for each member of Party-1's personnel?
Please list each Service/Deliverable and fee.
Please list each milestone and fee.
Please list each fee.
"Payment Schedule" means when the vendor will bill the customer. The customer may prefer not to be billed until after acceptance, which is a concept that gives the customer a short testing period after receiving goods or services to determine whether or not they are satisfactory. The vendor instead prefers to invoice the customer upon receipt of goods or services, so that the vendor can recognize its revenue sooner.

Party 1:
Party 2:
FEE - PAYMENT SCHEDULE (Party-1 Sells) - What is the payment schedule?
Please specify the percentages and dates/milestones.
Please specify each milestone and the fee amount to be invoiced.
Please specify each fee payment schedule.
"Affiliates" means a party's parent, subsidiary, or related business associations that, in future purchases, could receive the same pricing under this contract.
"Most Favored Customer Status" means that a customer is receiving a deal from a vendor which is just as good or better than any other deal the vendor has with any other customer.
"Assumptions" means requirements a customer must meet or the vendor will have to perform extra work and as a result will need to increase the fees.

Party 1:
Party 2:
FEE - CONDITIONS (Party-1 Sells) - Do any assumptions, affiliate pricing, or most favored customer status conditions apply to the fee?
What must Party-1 do?
What are the fee increases?
A vendor may offer a percentage discount off the invoice if the invoice is paid a certain number of days early so the vendor has its money sooner.

Party 1:
Party 2:
FEE - EARLY PAYMENT DISCOUNT (Party-1 Sells) - Does Party-1 receive an early payment discount for early payments?
To earn the discount, customer must pay the fee within how many days?
What is the discount percentage?
Expenses incurred by a vendor are sometimes reimbursed by a customer, and this cost is over and above the fees under the Agreement.

Party 1:
Party 2:
EXPENSES (Party-2 Reimburses) - Will Party-2 reimburse Party-1's expenses?
The "Warranty Length" refers to how long the Services and/or Deliverables will perform as expected.

Party 1:
Party 2:
WARRANTY LENGTH (Deliverables) - How long should the warranty last?
"Limitation of Liability" is a provision used to limit the kinds of damages a company could be liable for if sued. Parties often want to limit their liability for "Consequential Damages" - these damages can be quite large, might greatly exceed the money actually owed under the contract, and include lost profits and punitive damages. Parties may also want to impose a hard cap on their liability. For instance, a party could state that it won't be liable for more than $10,000, or for more than the fees under the contract.

Party 1:
Party 2:
LIMITATION OF LIABILITY - CONSEQUENTIAL DAMAGES - For consequential damages, do I want to limit liability for both parties or just for Party-1?
For certain egregious acts, you may not want the parties' liability limited. Which of the below acts do you want excluded from the limitation of liability?
For certain egregious acts, you may not want this party's liability limited. Which of the below acts do you want excluded from the limitation of liability?
"Limitation of Liability" is a provision used to limit the kinds of damages a company could be liable for if sued. Parties often want to limit their liability for "Consequential Damages" - these damages can be quite large, might greatly exceed the money actually owed under the contract, and include lost profits and punitive damages. Parties may also want to impose a hard cap on their liability. For instance, a party could state that it won't be liable for more than $10,000, or for more than the fees under the contract.

Party 1:
Party 2:
LIMITATION OF LIABILITY - HARD CAP - Do I want to impose a hard cap on liability for both parties or just Party-1?
Do I want to choose one of the options below, choose a multiple of the contract value, or specify the hard cap myself?
Which option?
What should the multiple be?
How much?
Do I want to choose one of these options, choose a multiple of the contract value, or specify the hard cap myself?
What should the multiple be?
How much?
"Indemnification" and "Limitation of Liability" both focus on parties' responsibilities in disputes. "Limitation of Liability" covers disputes between the parties who sign the agreement. "Indemnification" focuses on a dispute where a third party sues a party who signed the agreement, and the suit was caused by the other signing party's conduct. If this other signing party is required to "indemnify" the first signing party, that means the second signing party will generally pay the legal fees and any damages awarded or settlement amounts. "Claim Elimination" deals with the situation where a third party demands that a customer no longer use a service, deliverable or product because it violates that third party's rights. Under this provision, a vendor is required to eliminate that claim or take other steps.

Party 1:
Party 2:
INDEMNIFICATION (Deliverables) (Party-1 Indemnifies/Sells) - What do I want Party-1 to indemnify Party-2 for?
"Indemnification" and "Limitation of Liability" both focus on parties' responsibilities in disputes. "Limitation of Liability" covers disputes between the parties who sign the agreement. "Indemnification" focuses on a dispute where a third party sues a party who signed the agreement, and the suit was caused by the other signing party's conduct. If this other signing party is required to "indemnify" the first signing party, that means the second signing party will generally pay the legal fees and any damages awarded or settlement amounts.

Party 1:
Party 2:
INDEMNIFICATION (Deliverables) (Party-2 Indemnifies/Buys) - What do I want Party-2 to indemnify Party-1 for?
The "Term" means how long the contract will be in force.

Party 1:
Party 2:
TERM - LENGTH - How long is the term of the agreement?
How many years do I want?
How long?
An "Evergreen" term - also referred to as an "Automatic Renewal" - means that once the term comes to a certain date in the future, it automatically extends for an additional time period or repeated additional time periods until either party sends notice that the term does not renew anymore.

Party 1:
Party 2:
TERM - EVERGREEN - Will the agreement automatically renew or not?
"Termination for Convenience" means a party's right to terminate the agreement at any time for any reason at all (or even no reason), and is usually accompanied by advance written notice.

Party 1:
Party 2:
TERMINATION FOR CONVENIENCE - Do I want to terminate the agreement at any time for any reason or no reason with thirty (30) days prior notice?
A "Subcontractor" is a third party who one of the signing parties wants to perform some of its responsibilities under the Agreement, such as providing a Service or Deliverable.

Party 1:
Party 2:
SUBCONTRACTORS - Can one or both of the parties subcontract any responsibilities?
The "Governing Law" is the particular state or country's laws that you choose to apply to this contract. Often times, the governing law is the state or country within which one or both of the parties have a main office, or where they are conducting business under the contract.

Party 1:
Party 2:
GENERAL - GOVERNING LAW - Which state or country's laws govern this contract?
"Forum", "Venue" or "Jurisdiction" refers to where disputes between the parties must be litigated. Often the parties will still be free to seek injunctions or other temporary relief outside of the forum as they see fit.

Party 1:
Party 2:
GENERAL - FORUM - Which state or country is the forum for this contract?
"Assignment" means the right to transfer the contract, or a right or obligation under the contract, to a third party. Usually, this is prohibited or limited to a third party buying the shares or assets of a party to the contract.

Party 1:
Party 2:
GENERAL - ASSIGNMENT - Do I want both parties to be able to assign this Agreement, just Party-1, or not allow any assignments?

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Supply Your Customers. Use this Sample Supply Chain Agreement when selling goods from an ongoing supply to your customers, subject to your customer’s quality requirements.

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As Covered On:

Complete Description. This Sample Supply Chain Agreement covers vendors selling goods from an ongoing supply, subject to quality requirements, and explains the contract year, fiscal quarters, forecasts, purchase orders, exclusivity, requirements contracts, quality system, facility, materials, certificates of analysis, quality control, shelf life, customer complaints, ownership, title, risk of loss, fees, invoices and taxes, warranties, disclaimers, limitation of liability, indemnification, term and termination, force majeure, and general boilerplate for a sample supply chain agreement.