Supply Agreement
Companies operating in the International arena often make use of supply agreements, i.e. those contracts that require a regular supply of goods to the buyer that in turn sells them to another nation. These contracts require a long lasting relationship between the two contracting companies and are usually negotiated by legal advisers of the respective parties who are often completed by a negotiating team (made up of experts in business, finance and law). They are anticipated by preliminary documents negotiated and signed by the parties, such as confidentiality agreements, letters of intent, memorandum of understanding, etc…
Before reaching the signing of supply agreements, companies that wish to embark on this route must weigh many factors preliminary to the relationship for the supply of goods. For example companies that are interested must understand how many and who will be the suppliers of the products that will be supplied in order to understand if there are other suppliers available, what the prices of the goods that will have an impact on the value and quality of the finished product, what the risks of the supply are, the general purchase terms are etc…
The clauses that characterize supply agreements usually pertain to:
– guarantees that third party rights don’t exist relating to the property, use and exploitation of the products;
– the price and payment terms and the arrangements for its payment;
– general clauses that limit, for example, the resale in certain States or Nations, rules pertaining to the termination of such contracts, the law applicable between the parties, the competent court for the settlement of disputes etc…
There are also Many other clauses that can be added to these agreements to better define all operational activities that both parties – each for its own competence – will have to carry out to guarantee the exact performance of the contract, with the opportunity to check that the other party does the same.
Avv. Stefano Salvetti Avv. Luigi Colantuoni
Milano, lì 26 gennaio 2016
