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When drafting supplier agreement terms, it’s essential to include clear, enforceable clauses to ensure legal protection for both parties. Whether you’re a supplier or purchaser, these contracts can significantly impact your rights, responsibilities, and financial exposure.
A supplier agreement is a legally binding contract between a buyer and a supplier of goods or services. It outlines the terms and conditions under which the supplier delivers the products or services. These contracts are vital in reducing risks, ensuring consistent delivery, and resolving disputes quickly and fairly.
Including the following clauses in your supplier agreement strengthens your legal position and minimises potential conflicts:
Clearly define the goods or services being provided, including specifications, quantity, quality standards, and delivery timelines.
Example: “Supplier agrees to deliver 5,000 units of Item A by the 15th of each month, meeting ISO 9001 quality standards.”
Set out the agreed price, invoicing schedule, currency, and payment methods. Include penalties or interest for late payments.
Define delivery obligations, who is legally responsible for goods whilst in transit, and what constitutes formal acceptance of goods/services.
State the guarantees on product quality, performance, and legal compliance. Include remedies for breach of warranty.
Protect both parties by capping damages and excluding certain liabilities (e.g., indirect or consequential loss).
Ensure any proprietary or commercially sensitive information shared is protected during and after the contract.
Clarify who owns IP rights in any developed work or supplied product. This is especially vital in tech or design-heavy agreements.
Specify how and when either party can terminate the contract, including notice periods and conditions for early exit (e.g., insolvency or breach).
Include a mechanism for resolving disagreements, such as mediation, arbitration, or litigation. Define jurisdiction (e.g., “courts of England and Wales”).
This clause allows a party to suspend obligations due to unforeseeable events like natural disasters or pandemics.
A UK-based retailer entered into a supply agreement with a European food manufacturer. The contract lacked a proper delivery clause and failed to address delays due to customs inspections post-Brexit. When delays occurred, there was confusion about responsibility, leading to financial losses and a lengthy dispute.
Lesson: Including precise delivery obligations and jurisdiction clauses would have avoided ambiguity and protected the retailer from additional costs.
| Pros | Cons |
|---|---|
| Reduces legal risks and uncertainty | Requires time and legal input to draft |
| Clarifies expectations and roles | May create rigidity in commercial terms |
| Improves dispute resolution processes | Can be complex for international supply chains |
As international supply chains become more regulated post-Brexit, and with growing emphasis on sustainability and ESG, supplier agreements should evolve to include:
Businesses should regularly review their contracts and consult legal experts to ensure compliance with the latest laws and commercial trends.
A supplier agreement is a legal contract between a buyer and a supplier that outlines the terms for supplying goods or services.
Essential clauses include scope of supply, payment terms, delivery and acceptance, warranties, limitation of liability, and dispute resolution.
They allow either party to exit the agreement under specified conditions, protecting them from continued loss or liability.
A force majeure clause excuses a party from performing their obligations due to extraordinary events beyond their control.
Yes, reviewing with a solicitor ensures legal enforceability and compliance with current UK laws.
Annually or when there are significant business, regulatory, or relationship changes.
Yes, if a termination clause allows it or if the other party breaches key terms.
Need help drafting or reviewing your supplier contract? Speak with our Business Solicitors today. Whether you regularly enter into certain types of agreement and could benefit from template terms, or would like to start a new relationship or project in the right way, our commercial experts can help support you and your organisation with our agreement review and drafting services.
Contact us for more information.
This article was produced on the 28th July 2025 for information purposes only and should not be construed or relied upon as specific legal advice.
