Factors in Supply Chain Agreement

Parties:

The parties will be the vendor of the goods (who perhaps is not the manufacturer of those goods) (Vendor) and the purchaser of those goods (who perhaps will on-sell the goods or use them in manufacture) (Purchaser).

Supply:

The Vendor agrees to sell the goods to the Purchaser who agrees to buy them.

Time:

The supply usually starts on execution of the agreement. It usually ends on the earliest of:

• a specified termination date (subject to any rights of extension or renewal)
• breach of contract by a party for a specified number of days
• insolvency of a party.

Scope of Goods:

The agreement will identify the goods concerned. It may also set out the specifications of those goods, such as their source, composition, size or colour. It might also bring in any improved goods of the same kind that the Vendor later makes available to the market.

The Vendor may (but usually does not) promise to develop and enhance the goods during the period. If operating or maintenance instructions are required by end-users, these should be included.

Exclusivity:

Does the agreement prohibit the Vendor from (directly or through a third party) selling the same goods in the same market as the Purchaser?

Manufacturing:

The Vendor may be obliged to supply a fixed quantity, or to supply only to order, or to supply only if sufficient inventory is on hand to satisfy orders. The agreement might say that if the Vendor has competing buyers for the same inventory, the Vendor is obliged to prefer this Purchaser.

Intellectual Property:

If the goods are of a kind protected by a patent or registered design, then usually:

• the Vendor warrants it owns the intellectual property and that it does not infringe a third party’s rights
• the Vendor must maintain registration of the intellectual property during the supply
• the Vendor may be obliged to take steps against an infringer of the intellectual property.

Orders:

How many days in advance must the Purchaser place an order with the Vendor? Is there a minimum quantity for any one order? May the Vendor decline an order in whole or in part?

Take or pay:

If the Vendor is sourcing goods specifically for the agreement, the Purchaser may become subject to “take or pay” – if the Purchaser does not order and pay for a minimum quantity, the Vendor may sell the shortfall to a third party and have recourse to the Purchaser if net sale proceeds are less than what would they would have been on a sale to the Purchaser.

Prices:

While price depends on the circumstances, these are relevant:

• Are prices inclusive of weighing, testing, certification, packaging, GST, shipping and transport costs?
• Are prices in Australian dollars?
• Are prices changeable over time and if so, by reference to what?
• Is there a discount for volume?
• Is the Purchaser assured of prices no higher than those being charged by the Vendor to third parties?
• Is a deposit payable with each order?
• Are prices secured by a letter of credit, bank guarantee or other security?
• When is the price payable?
• Is there a discount for early payment?

Product Warranties:

The Vendor may be required to warrant that goods supplied:

• conform to specifications in the agreement
• conform to the order
• are shipped in time to meet the requirements of the order
• conform to those product warranties that the Purchaser will give to its customers when it on-sells the goods.

If the Vendor intends to limit its liability for a defective supply, this should be stated. Often a Vendor will undertake to repair or replace defective goods, but not be liable for any consequential loss the Purchaser or its own customer may suffer.

Consumable Item:

There is a huge range of computer consumable depending on computer peripherals.

CD & DVD’s: Single and Dual Layer Single, Boxes and Bulk on Spindles

Cleaning Products: Computer and peripherals

Computer Diskettes: Boxed and Individual, Mono & Coloured

Computer Paper: Invoice, Thermal Paper, Statement Paper, Transparencies, Photo Paper, Plotter Rolls, Cut sheet & Continuous

Printers: Toners, Films, Drums, Black and Colour Ink Cartridges

Removable & Tape Cartridges: ZIP, MO, Click!, DAT, Travan, DLT, Ultrium