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Supplier Agreements Explained

By: Garry Crystal - Updated: 1 Sep 2012 | comments*Discuss
 
Supplier Agreements Contracts Client

Businesses rely on suppliers in numerous ways to enable the smooth, day to day running of their companies. From the manufacture and delivery of products, to office equipment, stationery and even the supply of electricity and telephone lines. Suppliers are an integral cog to most businesses, and supplier agreements are the starting point for good client/supplier relationships.

The Need for Supplier Agreements

In order for any business relationship to run smoothly expectations and obligations should be discussed and agreed upon before work commences. The relationship between supplier and client should be clearly defined in the supplier agreement. There should be no misunderstandings regarding supply, delivery, timescales and payments.

Suppliers are a vital link in the business chain and as such the terms and conditions of the supplier agreement or contract will be very detailed. Businesses need to know that they can depend on the supplier to deliver their promises on time and as expected. One missed supply deadline could mean financial loss for the business and a loss of good faith and trust between supplier and client.

Terms and Conditions

The terms and conditions of any contract should be clearly set out and defined. There should be no ambiguity or misunderstandings in the terms and conditions. Supplier agreements will have various clauses written into them but it is important that the client does not blindly agree to these without first having taken the time to read and understand them.

Beware of supplier agreements that state that the terms and conditions are non negotiable. No contract should be set in stone and there should always be room for negotiation between the supplier and the client. Always beware of clauses that are in the supplier's favour and clauses that seek to remove any liability from the supplier if supplies and deliveries cannot be made or are late. If these are included in the contract then the client should dispute them or deal with another supplier.

Setting the Terms

Clients should be able to set some of the terms and conditions in any supplier agreements. In particular there should be clauses stating notice to quit supplier without reason. When it comes to payments then it may be a wise idea to insert penalty clauses for compensation if the supplier is late with the supply and delivery. Delays in supplies may have an impact on businesses and this should be figured in when working out a compensation rate.

Supplier Agreement Disputes

No one likes disputes and if they do occur the consequences can have a knock on effect for all involved. Breach of contracts can lead to long costly legal cases and the effect will be felt by client and supplier. It may be wise to have a clause in the supplier agreement on how disputes will be dealt with and if some form of mediation can be sought instead of the more costly legal options.

The Supplier Agreement

Supplier agreements will be differ from supplier to supplier but there are a few details that will be common to every contract. These should include:

  • The name and addresses of both parties involved.
  • A description of the supplier's services and requirements.
  • Payments terms and frequency of payments.
  • Confidentiality clauses.
  • Refunds and compensation clauses.
  • Renewal terms.
  • Signatures, dates and witness signatures if applicable.
This is by no means a definitive list and there will be more conditions and terms that will make up the supplier agreement. Clients and suppliers should be able to sit down and go through the contract, and no contract should be signed until all of the terms and conditions are agreed.

If a client is unsure about any of the terms and conditions then they should either ask for an explanation or pass the agreement to an expert who can advise on the matters. It is better to show that the terms are not clearly defined before signing than to wait for a dispute to occur, and a liability clause suddenly brought up later. No contract or agreement should ever be signed while there is doubt in the mind of the client.

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