A supply contract (also called a supply agreement, supplier agreement, master supply agreement, or sales contract) is a legally binding document between a supplier (Seller) and a purchaser (Buyer) that governs the ongoing or repeated supply of goods (sometimes services).
Two distinct types are polar opposites, and a third is neutral or unilateral.
1. Seller Biased, by far the most common, from the many large companies with inflexible T&C that are engraved in stone for a good reason. With tens of thousands of employees, they have established policies and procedures that employees are trained and certified in and know how to comply with. Making exceptions to their T&Cs for one customer could require additional training for all employees, which is unreasonable. Most customer-focused sellers permit minor clarifications at times for large customers, while some may allow no changes; it's our way, or the highway… take it or leave it. While I understand fully the time this can save, it doesn't make me feel appreciated as a customer.
Liability is typically higher risk because larger companies with "deep pockets" are more frequently targets of lawsuits. Seller-biased contracts typically include stronger protections in this section.
Seller-biased contracts use phrases such as "Buyer Shall" or "Buyer Must" versus "Seller May". For example, the Buyer may incur penalties if they fail to take a specified volume, but the Seller faces no failure-to-deliver penalties.
2. Buyer Biased contracts, like Sellers, have Terms and Conditions that their employees are trained to comply with, as well as Customer Terms and Conditions that require their customer obligations to be shared with their supplier(s) to avoid the Buyer getting caught in the middle.
For example, it is not uncommon for Automotive assemblers (Tier 1) to charge their supplier $20,000 or more per minute for downtime caused by their failure to deliver a good product. But what if your supplier's failure put you in this situation, and you had no pass-through or shared responsibility under your supplier contract? You are caught in the middle!
Buyer-biased contracts are more likely to reference a volume range or a minimum rather than a single value, which has a 0% probability of occurring. It has amazed me that companies will expect to get, or agree to, something they certainly will not achieve, putting them technically in default 99% of the time.
3. Unilateral contracts will include clauses such as "Both Parties Shall," or "Both Parties Must," or "Either Party May." These are generally much fairer and more common in partnerships, where companies work together, rather than in adversarial arrangements. These are rare and can be much simpler or much more complex for long-term agreements.
Larger contracts can take longer to negotiate, but they also avoid confusion or conflict, and last longer.
Experience has shown that large, detailed Requests for Proposal and Buyer Supply Agreements can lead to higher quoted prices.
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