An Exclusive Supply Agreement is a legal document that is created between two organizations or companies when they have entered into an agreement of supplying each other with exclusive products or services. In this type of contract there are usually two parties involved, the first being the parent company or organization and the second is the seller or supplier who has been chosen to be the exclusive supply partner for the said organization.
This contract clearly outlines the specifications of the products and or services that are to be rendered, along with the date from which they need to be rendered and also the conditions under which the entire supply agreement remains exclusive.
When Do You Need an Exclusive Supply Agreement?
The most common use of an exclusive supply agreement can be found in the retail business where a big organization ties up with manufactures and suppliers from all over the world to become their exclusive partner at either rendering a specific service or for manufacturing a specific product. One example of such an application can be found when a company A ties up with a manufacturer B and makes them their exclusive partner for manufacturing a future generation of smartphones.
One of the most important things to note here is the fact that the product or service that will be rendered by the exclusive partner will only have the brand name of the parent company or organization and not the second party.
Inclusions in Exclusive Supply Agreement
Parties Involved: In the creation of exclusive supply agreement there is usually two parties involved, the first being the parent organization who needs the exclusive service or product to be supplied, also known as the Company and the second is the supply agent or manufacturer who is also known as the Supplier.
Effective Dates: This section of the agreement outlines the date from which the said contract will come into effect and until when will the same be legally binding.
Where does it Apply: This contract is legally binding within the boundaries of the state, city or county it was originally drawn at.
How to Draft an Exclusive Supply Agreement?
Follow the mentioned below steps in order to draw exclusive supply agreement.
Organize a meeting between both the parties and discuss upon the terms of the exclusive supply agreement. For example, the exact specifications of the product or service that is to be rendered, the amount of funds that need to be disbursed in order to fulfil the terms of the agreement, along with the date until which the said contract is legally binding.
Once both the parties have agreed to the terms and conditions, reach out to a legal team and ask them to draft an exclusive supply agreement on your organization’s behalf.
Cross verify and check the details with both the parties and file the contract in the local court of law as advised by your legal team.
Benefits of an Exclusive Supply Agreement
The benefits of having an exclusive supply agreement are outlined as below.
Pros of Exclusive Supply Agreement
This legal document clearly outlines the individual responsibilities of both the parties before and after the contract has come into effect and thus makes sure that both parties are well aware of their duties and responsibilities at all points in time.
This contract is a legal document and thus can be presented in court if there is ever a need in the future for the same.
Cons of Not Having an Exclusive Supply Agreement
In the absence of an Exclusive Supply Agreement, both the parties don’t have a legal proof of a transaction ever taking place between both the entities and therefore stand to lose if the matter is ever taken to court.
Key Terms & Clauses in Exclusive Supply Agreement
Notices: Both the stakeholders in the contract need to issue certain notices to each other and this section of the contract, outlines the details of the same.
Disclaimers: The parties involved in the creation of the contract need to provide certain disclaimers to each other and this section contains details of the same.
Remedies: In the case of a lapse in agreed terms and conditions or a default in payment, certain remedies immediately come into effect, the details of which are enclosed in this section of the contract.
Obligations: Both the parties have certain obligations to each other, during, and after the creation of the contract, the details of which are mentioned here.
Sample of Exclusive Supply Agreement
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Exclusive Manufacturing and Supply Agreement
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