The International Supply Contract is used to establish long-term agreements (i.e. over a year) between a manufacturer (referred to here as the Supplier) and its client (the Buyer) for the supply of products at prearranged prices. Transactions are carried out through regular orders (every month, or every three months, etc.). The contract establishes the minimum and maximum amounts to be supplied, as well as a number of alternatives to adjust the price at the end of each year within the term of the contract.
The contract model may be used for two different kinds of supply: (a) the regular acquisition of products (components, raw materials, etc.) which the Buyer must incorporate into the manufacturing process of its own products; (b) the regular acquisition of products which the Buyer must sell elsewhere under its own brand, and without any considerable modifications, in order to complete its range of products.
To ensure a contract that best suits your needs, for some specific aspects of the contract (amounts and orders, formula for adjusting prices, payment terms, etc.)
Parties Clauses
- Agreement to supply
- Duration
- Quality
- Quantities and ordering procedures
- Deliveries risk & ownership
- Prices
- Payment terms
- Industrial property
- Claims
- Termination
- Force Majeure
- Resolution of disagreement
- Applicable law and competent jurisdiction
- Language
Sample of Content
DATE: ……………
BETWEEN:
……………………….. [company legal name] whose registered office is at ……………………………….
[address, city and country] and registration/fiscal number is …………………………, represented
by ……………………………………………………. [surname and first name, position] (hereinafter
referred to as “the Supplier”),
AND:
………………………… [company legal name] whose registered office is at ……………………………….
[address, city and country] and registration/fiscal number is …………………………, represented
by ……………………………………………………. [surname and first name, position] (hereinafter
referred to as “the Purchaser”).
PREAMBLE [Parties may include a preamble explaining the activities of each and describing the
history of their relationship, if for example the Contract continues a prior relationship].
………………………………………………………………………………………………………………………………………
………………………………………………………………………………………………………………………………………
IT IS AGREED AS FOLLOWS:
- AGREEMENT TO SUPPLY
1.1 The Supplier will sell and deliver and the Purchaser will buy the products specified in
Annex 1.
1.2 The list of products in Annex 1 may be amended by written agreement during the life
of this Contract.
- DURATION
2.1 This Contract is for an initial period of ………. [1, 2, 3, 4, 5] years commencing on
………….. [date].
2.2 At the end of the initial period the Contract will continue on a yearly basis unless it is
terminated by either Party giving not less than ………. [1, 2, 3] months written notice to
the other to expire at the end of the initial period or of any subsequent period.
- QUALITY
3.1 Products to be supplied under this Contract must conform to the description and
specifications contained in Annex 2.
3.2 The Purchaser must notify the Supplier promptly in writing if it becomes aware of any
Products which do not conform to the requirements set out in this Contract. The
Purchaser will not be obliged to pay for non-conforming Products and the Supplier will
be responsible for their removal and replacement with Products that conform to the
requirements of the Contract.
3.3 Where appropriate, independent inspection and testing of Products will be carried out
at agreed intervals with an independent third Party appointed by the …………..[Supplier
or Purchaser] and approved by the ………….. [Purchaser or Supplier]. A copy of every
test report will be made available to the …………. [Supplier or Purchaser] ………….. by
the ………….. [Purchaser or Supplier].
3.4 The costs of such inspections and tests:
Alternative A. Will be borne by the Supplier.
Alternative B. Will be borne by the Purchaser.
Alternative C. Will be borne equally by the Supplier and the Purchaser.
- QUANTITIES AND ORDERING PROCEDURES
4.1 The minimum and maximum quantities of Products that the Purchaser will order in
each Contract Year are set out in Annex 3. A “Contract Year” is the 12-month period
commencing on the date established in Clause 2.1 and on each anniversary of that date.
Some Tips
DATE
The date when the contract comes into force is the one that appears in its header, as
mentioned in the final paragraphs of the contract, before signatures (This Contract comes into
force on the date written above).
In some contracts -for example in the Supply Contract- the date of coming into force is also
mentioned in one of the clauses. In these cases you have to verify that the two dates inserted
in the contract (in the heading and in the corresponding clause) are the same, in order to avoid
discrepancies.
PARTIES
Be sure to insert in the first page of the contract the full details of the Parties:
When a Party is a company you must insert the following information: legal name, legal
form (limited, incorporated, etc.), full address, registration data and fiscal identification
number.
When a Party is an individual that works as independent professional (for example a
commercial agent) you must insert the following information: full name, profession, full
address and fiscal identification number.
CLAUSES
Clauses with different alternatives: choose the most favorable
In the most important clauses of each contract (exclusivity, payment terms, applicable law and
competent jurisdiction, etc.) several drafting alternatives are proposed so you can choose the
most appropriate to each situation. Therefore, the user before submitting the contract to the
other Party must choose the alternatives that seem best suited to their interests, and
eliminate the rest.
Clauses with blank spaces to be completed
In several clauses of the contract blank spaces appear with dots (…………………..) that the user
has to complete inserting text. Following the dots, between brackets, you will see the data and
explanations to insert the text.
When the text between brackets is in normal letters (the same as the contract) and
separated by “,” or the word “o”, the user must insert one of the options suggested.
Example of blank space (……..) with options to select between brackets:
Orders handled before completion of the present Contract which produce sales transactions
within ………. [1, 2, 3, 6] months shall entitle the Agent to receive the corresponding commission.
In this case the user must choose between options 1, 2, 3 or 6 months and insert one in the blank
space (……..).
When the text between brackets is in italics the user has to insert the data and information
requested and eliminate the bracketed text.
Example of blank space – (………) to insert text:
Both parties, by mutual consent, resolve to refer any dispute to the Rules of Conciliation and
Arbitration of the International Chamber of Commerce by one or more arbitrators appointed
in accordance with said Rules. The place of arbitration shall be ……….. [city and country]. In this
case the user must insert in the blank space (………..) the city and country chosen to conduct
the arbitration and afterwards eliminate the bracketed text [city and country].
Notices Clause
Sometimes it may happen that the official address of the Parties which appear at the beginning
of the contract is different from which is to be used for communications between the Parties
during the terms of the contract. In this case the user should include at the end of the contract
a Notices Clause.
Example of Notices Clause:
Notices. – In order to comply with their contractual obligations, the Parties establish the
following address for the provision of notices related to this contract:
– Party 1 ……………………………………………………. [insert full address].
– Party 2 ……………………………………………………. [insert full address].
ANNEXES
The contracts incorporate some Annexes, each of them, referenced to the corresponding
Clause. Annexes are drafted in commonly used formats, although the user must adapt these
formats and the text inserted in them to each particular situation.
SIGNATURES
People who sign
Persons signing the contract on behalf of the company must have the authority to do so and
preferably, be entitled on the basis of a power of attorney. Below the signature, in addition to
the full name of the person that signs his/her position must be inserted. When one of the
Parties who signs is a natural person (for example a commercial agent in a Agency Contract)
obviously he or she is the person that has to sign the contract.
The laws of some countries require that contracts, to be valid, shall be signed in front of
witnesses or a public notary. Therefore, before signing a contract you should be informed
about the requirements that may exist in each country.
Place and date of signature
Usually contracts are signed by both Parties on the same date and place. Nevertheless, in
international contracts, due to physical distance, it is common that each of the Parties sign in
different dates and places. This contract provides for both alternatives so it comes to choosing
the most appropriate to each situation.
Number of copies
Usually, the Parties sign two copies of the contract, each Party retaining one of them, but cal
also arise the need to sign more copies. In this case all you have to do is mention explicitly the
number of copies to be signed in the paragraph that is included at the end of the contract
(Both Parties declare their conformity to the present contract, which is signed in …… copies,
each of which shall be considered an original).
GENERAL RECOMMENDATIONS
The Parties must sign all pages of the contract, including Annexes, so they are also valid. It is
better to use ball point or pen (not pencil) in a color other than black (e.g.: blue); this makes it
easier to distinguish an original document from a photocopy.
It is preferable (although no mandatory) to express sums of money and percentages in words
and figures. Of course, the words and figures for a given amount must match exactly. You also
must insert the currency in which the amounts are expressed. It is advisable to use the rules
establish by ISO that name each currency by three capital letters (EUR for euro, USD for dollar,
GBP for sterling pound, JPY for Japanese yen, etc. – you can get the acronyms of every currency
in the website www.oanda.com).
Once you have chosen the best alternatives of each clause and have completed the blank
spaces you should revise the whole contract to remove remaining paragraphs and correct any
errors.