Supply Agreements

Guidance For Negotiating Supply Agreements

The sale of goods and services is a broad area that covers an array of potential legal and business issues. Generally, when you engage a supplier for business services or you are engaged by another for the supply of your services, it is advisable to set down service levels, amongst other things, to be achieved. It is also prudent to consider the consequences of failing to meet those service levels.

At Tinsdills, we have a dedicated team of business law solicitors who are able to draw on demonstrated experience in preparing and negotiating supplier agreements and advising on the risks involved for your business. More business services include:

Trust Tinsdills With Your Supply Agreements

Negotiating a new agreement for the supply of goods and/or services can be an exciting time for your business. However, it is important to ensure your business is protected so far as possible (particularly when dealing with larger businesses and retailers). Many large businesses will have a standard supply contract that will inevitably be drafted in its favour. It is therefore prudent to ensure that the terms of the supply agreement work for you too or you are at least aware of any pitfalls and areas of risk. 

The supply agreement will usually cover key terms such as price, time and method for payment, exclusivity or non-exclusivity, notice periods and termination provisions, delivery and logistics, regulatory requirements and service levels.

Our team of expert business law solicitors is on hand to prepare and negotiate the supply agreement that is right for your business and which mitigates risk whilst striking a balance between the parties.

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    Having a standard supply agreement may be useful but they are often fraught with danger. By their nature, standard agreements are very general and will not necessarily accurately capture the full extent of the parties’ intentions. Where the supply of goods or services is complex, or the value is particularly high, a standard supply agreement is unlikely to have the sophisticated terms and details to provide proper protection and mitigation of risk for the parties. A bespoke supply agreement will aim to ensure that the agreed terms are sufficiently accurate, reasonable and comprehensive to cover pertinent issues.

    Penalty clauses are not enforceable under English law. However, properly drafted and considered provisions for liquidated damages may be included. Liquidated damages relate to compensation, at a fixed amount, which is agreed at the outset of the contract and which becomes payable in the event that a party commits a breach of the agreement, without the need to pursue a lengthy contractual claim. However, it is important to ensure that the agreed amount of damages represents a genuine pre-estimate of the loss suffered as a result of the breach. If that is not the case, the courts are likely to interpret such provisions as a penalty clause and therefore unenforceable.

    We would always advise you to have a written contract in place to record the terms that have been agreed between the parties so that, in the unfortunate event of a dispute, the written contract can be used as evidence of what was agreed. That being said, oral agreements are generally enforceable (albeit often difficult to prove what was agreed between the parties in the event of a dispute), but it is important to note that there are a number of situations where a written contract is required by law or in order to fulfil certain registration requirements.

    Caroline, Becky and the team acted on our behalf in the management buyout of our shares in our commercial refrigeration and ware washing goods distribution company. It was a complicated transaction under which there were various parties including finance, numerous lawyers, accountants and tax advisers. The team negotiated a fair deal for us and were supportive, explained complex matters in simple jargon-free language and we felt confident in their ability in acting on our behalf. We would like to thank the team at Tinsdills for their hard work, dedication, help and patience throughout the transaction.”

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    “With all the varied aspects of our business, Caroline Gray was very patient and accommodating to our needs and changes and even more changes. Thank you very much.”

    “Having dealt with Tinsdills a few years ago (from the opposite side of the table), Caroline and her team were my first choice when embarking on the next chapter of our business growth. A complicated share/company buyout; the team were always on hand to offer words of advice, illustrating that they ‘had my back’ on every occasion. I would not hesitate to recommend their proposition to any business looking for a first-class legal team, able to present information in a logical and understandable fashion. Thank you to Caroline, Rebekah and the Team.”

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