Table of Contents
In Short
- Supply Agreement Importance: A supply agreement defines the terms and responsibilities between your eCommerce business and suppliers or buyers, minimising disputes and ensuring clarity.
- Key Clauses to Include: Be specific about the purpose, scope, and service standards. Limit liability within legal boundaries to protect your business.
- Legal Compliance: Consult with a lawyer to ensure compliance with relevant laws, like the Sale of Goods Act and Unfair Contract Terms Act.
Tips for Drafting Supply Agreements When drafting a supply agreement, detail the scope of the goods or services and clarify liability limits. Include specific service standards, especially for technical or industry-specific skills. To secure robust, compliant agreements, work with a legal professional to ensure your contract meets all necessary legal requirements.
There are many things to think about as an online store owner running an eCommerce business. Running an eCommerce website is not just about day-to-day interaction between your eCommerce business and online customers for your product. Therefore, you need to think about more than your payment terms and conditions and providing contact information. As a website store, you will also have contact with other companies, such as those you supply to or supply to you. You must be clear about these supplies with supply agreements. As such, supply agreements are critical to determining the legal liabilities and responsibilities of your online business. A supply agreement is a key contract you should have if you own and operate an eCommerce business. This article will explain how to draft a supply agreement for your online business.
Supply Agreement
A supply agreement is an agreement to supply goods and services from one company to another. People often refer to these as a supply of goods agreement or a supply of services agreement. For example, you may be an eCommerce business supplying a software service to another company. Or, you may be an online outlet selling clothes and require these as goods from a clothes wholesaler.
Supply agreements contain the details of what you, as an online business and the buyer or supplier, arranged. As such, supply agreements reflect the business relationship between your online business and another business. It is often a good idea to draft a supply of goods agreement each time you supply goods to one another.
You must draft your supply agreement well to ensure that it is unlikely the two of you will disagree about the supply of goods or services in the future. The supply agreement provides you both with certainty and supply continuity if you are happy with the arrangement. This, in turn, reduces the risk for your eCommerce business. Your supply agreements will clarify what you and your online business are liable for and what you are not liable for when problems arise.
Drafting Supply Agreements For Your Online Business
The safest way to draft your supply of goods agreement is to take legal advice from an eCommerce lawyer. Supply agreements, for example, must comply with legislation such as:
- The Sale of Goods Act (SGA) 1979;
- The Supply of Goods and Service Act 1982; and
- the Unfair Contract Terms Act 1977.
A lawyer can check that your supply agreement for your online business complies with the law and reflects what you and the supplier or buyer agreed.
When drafting a service agreement, you should understand that there is more to a service agreement than simply containing the following:
- agreed price;
- names of parties to the service agreement, which is your online business and another business, and
- timeframe of supply.
Below, we explain some points to consider when drafting a supply agreement for your online business.
Purpose, Scope and Specification
There are specific clauses that you will likely need in your supply agreement. Your supply agreement should start with detailing the purpose of the supply agreement, such as to supply handbags to the eCommerce online bag retailer. This, however, needs to be specific, which is why you need a scope and specification clause.
For example, you may wish as an online business to have a telephone answering service as you do not have staff to look after phone calls. However, it would be helpful if your supply agreement specified whether the service provider will only answer calls or if they will also provide an answering machine service outside of business hours.
Service Standard
If you are drafting a supply agreement, which is a supply of services agreement, you may want to include an enhanced service status. All supply of services agreements should have a service standard in them already, as this is a legal requirement. This means your eCommerce business provides a service using reasonable skill and care.
However, if your industry sector requires specific skills, your buyer may want to include these in these in the supply agreement. For example, any technical skills your online business should have.
Limiting Liability
Whether you are a supplier or buyer of the service agreement, your online business will want to limit its liability on the service agreement. For example, if you are a supplier and your online website supplies goods to another company, you may want to limit yourself for damage in transit.
You should not know that the law says there are certain things you cannot limit liability for. For example, you cannot restrict all liability for care and skill liability when carrying out a service. This means you cannot limit liability for death or personal injury that results from your eCommerce website’s negligence.
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Key Takeaways
A supply agreement is a legally binding contract between two businesses about the supply of services or goods. It explains the details about what each agrees to and reduces potential disputes. When drafting a supply agreement, specific clauses are essential to include. This article has described some of these. For example, being particular about the scope of the supply. Also, to ensure that you limit your liability but comply with the legal rules when doing so.
If you need help drafting a supply agreement for your online business, contact our experienced eCommerce lawyers as part of our LegalVision membership. For a low monthly fee, you will have unlimited access to lawyers to answer your questions and draft and review your documents. Call us today on 0808 196 8584 or visit our membership page.
Frequently Asked Questions
1. What does a typical Supply Agreement contain?
This depends on the circumstances between the parties. However, some contracts will contain key performance indicators (KPIs) or service level expectations.
2. What are the four usual requirements of a legally-binding contract?
The four usual requirements of a legally enforceable contract include mutual assent, following a valid offer and acceptance, adequate consideration, and legal signature.
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