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If your business supplies or receives goods or services, then
you will have come across a supply agreement in some shape or form.
Known by many other names, these agreements set out the terms and
conditions governing the supply of a certain good or service, and
should be drafted to appropriately reflect each party's
Whether you are the supplier or the customer, there are a few
things you should consider when negotiating supply agreements:
If you are the supplier:
Is the price fixed for a certain term? Or can you increase the
price if there are cost increases beyond your control (e.g. raw
What warranties are you prepared to give? There are certain
statutory warranties under the Australian Consumer Law that you
can't contract out of. If you are importing goods from overseas
you may still be liable for manufacturer warranties, so you should
consider how best to minimise this risk in the agreement.
What are the confidentiality provisions? You might want to keep
the pricing details top secret and away from your competitors'
If there is a termination for convenience clause, is the notice
period enough time for you to stop any third party orders?
Upon termination, ensure you get full payment for all goods
and/or services supplied and any other costs you reasonably
If you are the customer:
Are the deliverables time critical? If so, consider whether
liquidated damages are appropriate.
Ensure you have the appropriate IP licences, or that the IP is
assigned to you, so you can continue using the deliverables.
Consider whether the warranties provided by the supplier are
sufficient. Don't forget you may also have rights under the
Australian Consumer Law.
Is there a renewal period for the term? If so, is it automatic
or at your discretion? Diarise any notice periods so you don't
Has the supplier limited their liability? If so, will it still
cover your worst case scenario? If not, request for the liability
cap to be increased, or consider any relevant carve outs.
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