What Is a Gas Supply Agreement?
A gas supply contract agreement is entered into between 2 parties, the company generating the gas and the company supplying the gas to the end-user. The volumes delivered and the price per unit will vary from month to month.
In a fuel supply agreement, the supplier of the fuel will try to secure it at an affordable rate. The main information which is incorporated in the contract would be the quality and quantity of the fuel along with the delivery schedule.
When Do You Need Gas Supply Agreement?
The supplier and the generator of gas are usually two different entities. A bulk supply agreement is required when the supplier wants a long term supply arrangement with the gas company.
The main concern of the supplier would be whether the fuel meets the quality specifications mentioned in the agreement. In the event that the company generating fuel does not have adequate supply, will they make alternative arrangements for supplying the fuel?
A contract will ensure that both parties adhere to the agreement or else face legal action.
Inclusions in Gas Supply Agreement
The following information can be found in a natural gas supply agreement:
- The names of the parties to the agreement
- The effective date of the agreement
- The volume to be supplied and the delivery details
- Prior intimation by the supplier for the quantity required
- Calculation of the gas price
- Amount to be paid including the due date
- Rights and obligations of both parties
- The term of the agreement including the starting and ending dates
- The responsibility of the costs incurred during transit
- Liability of damage caused to the equipment
- Acknowledgement of normal loss during transit
- Responsibility for additional loss over and above the normal loss
- When transfer of ownership is completed
- Share in the revenue if done on a sharing basis
- Ceiling on the costs of transit and responsibility of payment
- Calculation for increase or decrease in the volume of gas
- Treatment of changes in gas prices over duration of transit
- Termination and severability
- Force Majeure
- Title and brand ownership
- Boilerplate provisions
How to Draft Gas Supply Agreement?
You can refer to a gas supply agreement template while drafting an agreement. The following points should be kept in mind:
- Eligibility of the parties to the contract: All parties should be of legal age, of sound mind and not be under coercion
- Consideration agreed: The price at which the gas generation company has agreed to supply the gas along with the payment and delivery schedule
- Terms: Terms of the contract should be fair to both parties
- Confidentiality Clause: No party should disclose any information to a third party
- Dispute Resolution Clause: Attorney fees, jurisdiction for settling the matter
- Termination Clause: For premature termination of the agreement
- Governing Law: Governing law should be adhered to
- Signatures: All parties should sign the contract
Benefits of Gas Supply Agreement
With a model fuel supply agreement,
- The gas generator is aware of the volume of gas that needs to be delivered along with the schedule according to which delivery needs to be made.
- The gas supplier is aware that the gas generation company will supply the fuel as per the supplier’s requirements
- If either party fails to honor their contractual obligations, then he can take legal recourse.
- This allows the generating company to enter new markets and the distribution company to earn additional revenue.
- The use of brand and copyrights of one company by the distributor increases sales for the agent company.
- A contract protects the parties against volatilities in the international market gas prices.
Key Terms/Clauses in Gas Supply Agreement
The following are the key terms or clauses in a gas station fuel supply agreement:
- Scope of the agreement-Delivery volumes and delivery points
- The nomination of a specific date for supply
- Terms of payment, dispute of invoices and audit rights
- Performance obligation: Penalties for failure to deliver the gas on time and method of calculation of such penalties
- Transportation and imbalances
- Quality and measurement
- Title, warranty, and indemnity
- Force majeure
What Happens in Case of Violation?
It is important for both parties to study the fuel supply agreement pdf before signing the agreement. This will ensure that they have read and understood all the clauses.
If there is a violation by either party, then it can demand money damages, including lost profits.
If there is fraud detected in the agreement, it can either be canceled under rescission or a new contract drawn under reformation.
If the supply has already begun, then the party violating the contract has to fulfill the contractual obligation under specific performance.
Gas Supply Agreements are legal documents drafted by top law firms for their clients. These agreements serve as great business needs for both parties.
[Also Read: Supply Agreement]
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