Game, set and match! Why supply chains matter

Supply chain terms and conditions: why clear contracts matter

Darcy MacMillan, Solicitor

When someone enjoys a live event or picks a product from the shelf, they usually only see the finished result. What they do not see is the careful rally behind the scenes: a chain of businesses working together, each playing an important part in getting everything over the line.

Take Wimbledon, famous not only for grass-court tennis, but also for its strawberries and cream. An event of that scale takes planning, and it is important that no one drops the ball. What if the strawberries are not delivered on time, there is not enough stock, or the storage conditions are not quite right? Every part of the supply chain has a role to play.

Supply chain terms and conditions: managing risk, liability and responsibilities

Terms and conditions play a key role in managing the supply chain. Manufacturers, distributors and retailers will each have different roles and responsibilities. Those obligations need to be clearly reflected in the terms and conditions and, where appropriate, flowed up or down the chain.

Key points to consider in the terms and conditions, whether a business is serving as manufacturer, distributor or retailer, include:

• Route to market – is there any exclusivity, and if so, what conditions apply?
• Stock – are there forecasting requirements or lead times to manage?
• Quality – are there storage and handling obligations or inspection or audit rights?
• Warranty, returns and recall – what is the process, and are there any limits?
• Liability and insurance – how is product liability allocated, and are there limits or indemnities?
• Payment – what is the price, can it change with demand, and what are the payment terms?
• Intellectual property – is any IP involved, and are there controls on how it can be used?
• Brand protection – how will announcements, advertising and trade mark use be controlled?

Each of the manufacturer, distributor and retailer will tailor these points to suit their own position, and much will depend on bargaining power. Retailers will usually want to manage the obligations and liabilities they owe to consumers, particularly where their contract is with an intermediary rather than the manufacturer. Intermediaries will aim to keep their terms with the manufacturer and retailer aligned, whereas manufacturers will want to limit their obligations and liabilities to that which they can reasonably foresee.

Terms and conditions are important in ensuring that each business in the supply chain understands their role and responsibility and manages risk. With clear terms in place, businesses are better prepared to avoid disputes and respond quickly if something goes wrong, resulting in a smooth and successful supply chain process.

For further advice contact our commercial team.