What is a Product Supply Contract?

A product supply contract is a document that contains the agreement of a manufacturer or seller to supply products to a company or a buyer. In every business, raw materials are needed to create the products that we can give to our consumers. If you have a restaurant, you need different ingredients. If you have a clothing line, you need raw materials to create your fashion products. Even if you are in a digital publication, you may need supplies that your workers should use to finish their job like computer ink. It will never happen that a company will need nothing for them to do their tasks.

Even in manpower supply, you need to have a good relationship with suppliers. It is more needed in getting your product supply. You need to have a nice relationship with suppliers so that they will give you the best products. The quality of your products can rely upon the raw materials so you need to get a great supplier that can give you the best raw materials. You have to ensure that your by-product will turn out good after using their products. That is why you have to find the best supplier. Their supply greatly affects your products.

Through the contract, you can secure a supply chain that will be given at the specific times that you need it. The delivery will be continuous, according to the frequency that you need the supplier’s products. Whether you need a food supply or office supplies, you must first check if the supplier can give a good product that can improve the quality of your work. You can do it by having the first supply before making the seller your regular supplier. You need to ensure that the supplier can give the best products and will always be good at delivering the products on time. Product delays can cause a lot of trouble for your company. So, you should get a supplier that can keep his or her word to deliver the products to you at the right time.

When buyers order from suppliers, they usually order in bulk. This makes them save money because they can have discounts and packages from the suppliers. After the delivery of the products, the buyers will check if they are in perfect condition and analyze if the products will suit them best while using them. If the products turn out to be of mediocre value, they will not order from that supplier again and will just find another supplier for their company. You can find a lot of manufacturing sellers today that compete for the chance to supply products. You just need to find the best from them so that you can have a good product supply.

Elements of a Product Supply Contract

Have you seen a product supply contract template or a simple supply agreement sample? If you do, you can see that it has essential components. These components are vital so that you can have a complete agreement that consists of everything that you need within the contract. Read the following and learn some of the elements of a product supply contract:

Introduction: This is the section where you have to introduce the parties involved in the contract. You must state the name of the Supplier or the company who will manufacture the products for the Buyer. Then you must state the name of the Buyer or the company who will be going to order the products. Be clear in stating these details in the introduction. The contract is addressed to them so you have to place the names carefully.Recitals: This is the part where the contract will state the kind of agreement that you have entered. In this case, you have to state that you entered a product supply contract. Describe the agreement in a few words. You should also describe the business of the supplier. This details the service that the supplier can give to your company. Most recitals are called Exhibit A. The recitals define the contract and provide key information for both parties.Term: It is the time when the products are supplied. Usually, the term begins on the date of the agreement. It is also called the effectivity date. You must state the number of years that you will want to have a term with the supplier. If you want to renew the term with the supplier after the said date, you should provide a clause stating that the term is renewable. But consider the length of time that you will want to add to the term. The term can be longer or shorter. It depends on what the both of you will agree upon. State the renewal term and place the span of time when you can consider that the contract will not be renewed anymore.Agreement to Purchase: This contains the Buyer’s promise to buy. The Buyer should declare that he or she will buy the Supplier’s products and will be going to pay the applicable amount for it. This denotes the agreement of the Buyer to purchase from the Supplier.Agreement to Sale: This is the promise of the Supplier to supply products to the Buyer. This denotes the supplier’s honesty to provide good products to the buyer. The Supplier will promise to provide the products on time, given that the Buyer has paid or will pay for the products.Product Quantities: This is the section that contains the quantities of products that the Supplier has to deliver to the Buyer. It is a certain amount that should be provided in a specific time frame. You must state the number of quantities and place the time-frequency that the Buyer should need them. The frequency may be days, weeks, or months. It depends on the agreement of both parties. The Supplier should deliver the same amount of products every frequency that the Buyer needs the products. There should be no deficit within the quantity. The number of the products should be perfectly exact. If the Buyer cannot buy the minimum quantities of products that they have agreed upon, the Buyer should pay a certain amount to the Supplier paying the ‘liquidated damages’. Place this amount in the contract and the Buyer should pay this if ever this case happens. On the other hand, if the Supplier cannot supply the minimum quantities of products, he or she will also pay the Buyer. This is also ‘liquidated damages’ that the Supplier needs to pay to the Buyer. You must also place this reasonable amount in the contract.Exceptions to Purchase: This is an optional clause that states the reasons why the Buyer can fail to purchase from the Supplier. These can be time of emergencies, incident of buying different items from the Supplier, or the Supplier do not want to supply items anymore. In these occurrences of events, the Buyer can buy from a third party that can sustain his or her needs for products.Product Inspection: This clause states the right of the Buyer to inspect the products first before accepting them. There should be given a specific time for the Buyer to inspect the products and ask for a refund or replacement of products. After the given time, the Supplier will not be liable anymore for the products that he or she has delivered. The Supplier will not be liable to replace it or give a refund to the Buyer.Warranty: This section contains the promise of the Supplier to deliver products with no defect. The Supplier will ensure that he or she will give the best products to the Buyer. If ever the Supplier’s products will be found to be defective, he or she has to replace the products. So, the Supplier must carefully deliver the products to the buyer for them to have no defects. Or he or she will have to replace these products.Issuance of Purchase Order: This denotes that the Buyer should make requests every time he or she will order for the Supplier. This is to ensure that the Buyer truly needs the product. This applies to a long-term agreement. If the Buyer requires a small number of deliveries or a few orders, there may be no need for this clause.Cancellation: This states that when the Buyer cannot give Purchase Orders, he or she should have the right to cancel at specific times. The Buyer just has to declare the length of the time of cancellation. This can happen sometimes if the Buyer still has supplies. So, provide a clause for the cancellation to solve this problem.Delivery of Products: You should write in the contract the time of the delivery and the date of the delivery. The place where the products will be delivered should also be placed. It will be written that it is the Supplier’s responsibility if the products will be damaged or lost upon delivery. But when the products are delivered to the Buyer, the responsibility will be shifted to the Buyer.Pricing and Payment Terms: The price that both parties agreed on the products should be written in the contract. The Buyer has the responsibility to pay this price for every delivery. The Supplier has the right to expect this price. Payment terms should be also provided in the contract. This will take care of their deal with money.Intellectual Property: Of course, the Supplier has intellectual property rights when they are supplying the products in regards to trademarks, designs, copyrights, and other things. This section clears that the Buyer can use the products but the intellectual property rights remain with the Supplier.Confidentiality: This is a confidentiality clause in the agreement that denotes keeping information to keep things private. Usually, the Supplier asks this from the Buyer. There are some things that Supplier’s will not want to be disclosed about his or her company.Termination: If one of the parties will want to end the agreement, there should be a termination clause that will handle this thing. The Buyer may have found another supplier or the Supplier increased the price of the products and the Buyer cannot agree with it. This clause will set each of the parties free if ever they want to terminate the contract.

How to Create a Product Supply Contract

Do you need a raw material supply agreement template or a simple food supply agreement sample? Are you about to create a product supply contract? Well, we have good news for you. We have provided some steps so that you can easily make a product supply contract. They are the following:

  • Step 1: List the Products

    The first thing that you need when finding a supplier is you have to list the products that you need. List all the products that you want to be supplied. This way, you can search for the best supplier that can provide the products that you need.

  • Step 2: Find the Best Supplier

    After knowing all the products that you need, research the best suppliers in your place. Search on the internet for them. You can use customers’ references so you can know which of them are good suppliers. Testimonies will prove their good service and the goodness of their products. It will be better if you will have references to ensure that you will deal with good suppliers.

  • Step 3: Assess the Products of the Supplier

    After you have found several suppliers, you need to examine their products. Know which of the products are best. Personally see their products so that you can get a good assessment of them. Choose the supplier with the best offer. Two things that you should consider are the price of the products and their quality.

  • Step 4: Negotiate with the Price

    After you have chosen the best supplier, you must not settle with their price. You have a chance to negotiate with them and set a better price for the products that you will buy. Make them agree to the price that you desire. Some suppliers are summoned by negotiation if you will just be good at talking. If you can make the supplier agree with you, then you have found a supplier for the products that you need.

  • Step 5: Agree on Terms

    Then, you should negotiate everything with the supplier. Agree on the length of term, the minimum quantities of order, delivery details, and other things like confidentiality, cancellation, and termination. If you can think of anything that has to do with your orders, then you must include them in the contract. Be sure to have a complete agreement with the supplier so that you can start writing the contract.

  • Step 6: Sign the Contract

    After you have agreed on everything, you can write the contract. At the end of the contract, place spaces for your signatures. Then sign the contract. After that, you can make your first purchase order to the supplier. Then after that, wait for the delivery of products. After the products are delivered, inspect them. If you have found them good, then you have found a good supplier for your company.


What are the characteristics of a good supplier?

The characteristics of a good supplier are compliance with business standards, expertise in the product type, accountability, and quality for improvement. It is a good supplier if it continues to provide good products for you and always give them on time.

Where do you find the best suppliers?

The best way how you can find the best suppliers is online. Search for business directories that can point you to the suppliers of the products that you are looking for.

To ensure that you will have a good supplier, you must be sure to enter a product supply contract. Through it, the supplier will be obliged to do their responsibilities to you because of the contract. You can ascertain that you can get the best products that you need on time. Are you someone looking for a template for a product supply contract? This post has 12+ SAMPLE Product Supply Contract in PDF. If you need one, you can have it for free. Download now!