Manufacturing agreement

This manufacturing agreement template provides a framework for a manufacturer and a customer to agree orders for the manufacture and supply of products.

The agreement comes in two versions, standard and premium, and has been created for the situation where:

• the customer is specifying the product;
• the customer owns any intellectual property rights in the product;
• the manufacturer has been appointed to manufacture the product to that specification and that design; and
• the manufacturer will supply that product solely to the customer.

Minimum orders

Both agreement versions include basic minimum order obligations.

They include an optional commitment to order and supply a defined quantity of products over the term of the agreement. There is also a forecasting provision, which allows for periodic minimum quantities.

Order procedure

The ordering procedure is the same in both the standard and premium versions of this template. In summary the customer begins the process by issuing a "manufacturing request" document. The manufacturer responds to the request with a "manufacturing offer" document. This document constitutes a contractual offer. The customer then has a defined period within which to accept the offer and bring the order into force.

Prices and payment

The manufacturing agreements incorporate all the usual sorts of pricing and charges provisions. They include a clause on invoicing which specifies the period within which the customer must pay invoices that have been properly issued. They also include clauses covering VAT and other taxes, late payments, interest on late payments and the variation of prices.

Confidential information

Manufacturing arrangements often involve the sharing of sensitive information, and for this reason the documents both contain mutual confidentiality obligations. The definitions of confidential information used in the documents are relatively flexible, and the confidentiality clause itself includes all the usual exceptions.

Termination of manufacturing agreement

The agreement may be terminated by either party in defined circumstances. Optional provisions are included so that, in the event of termination, the customer may be required to purchase stock held by the manufacturer. The customer may also be required to purchase components or ingredients that have been purchased by the manufacturer with a view to meeting a minimum order requirement.

Terms and conditions of supply

The terms and conditions under which the products are actually supplied to the customer are set out in a schedule to each agreement. Those terms and conditions cover matters such as:

• the manner of delivery of the products to the customer or collection of the products by the customer;
• the passage of risk in the products from the manufacturer to the customer;
• the passage of title to - that is, ownership of - the products from the manufacturer to the customer;
• product related warranties; and
• certain terms regarding the breach of those warranties.

Premium vs standard manufacturing agreement

There are a number of significant differences between the premium and standard versions of this document.

The premium document includes provisions covering the supply by the customer of components or ingredients for the products, and the supply by the customer of equipment to be used in the manufacturer of the products. The equipment remains in the ownership of the customer, and would be returned upon termination of the agreement.

The premium document also includes clauses covering:

• change control;
• publicity around the agreement itself;
• design services and training services provided by the customer to the manufacturer; and
• more detailed boilerplate clauses.

1. Definitions
2. Term
3. Order procedure
4. Manufacturing
5. Product Specification
6. Customer Components (premium only)
7. Customer Equipment (premium only)
8. Minimum Quantity
9. Forecasting
10. Terms and conditions of supply
11. Design services (premium only)
12. Training (premium only)
13. Intellectual Property Rights
14. Exclusivity / no exclusivity
15. Change control (premium only)
16. Charges
17. Payments
18. Confidentiality obligations
19. Publicity (premium only)
20. Warranties
21. Indemnities
22. Limitations and exclusions of liability
23. Force Majeure Event
24. Termination
25. Effects of termination
26. Anti-slavery
27. Anti-corruption (premium only)
28. Anti-tax evasion (premium only)
29. Notices
30. Assignment
31. No waivers
32. Severability
33. Third party rights
34. Variation
35. Entire agreement
36. Law and jurisdiction
37. Interpretation

Schedule 1 - Manufacturing particulars

Schedule 2 - T&Cs of Supply

Schedule 3 - Form of CCN (premium only)

How are the intellectual property rights of the customer in the product designs protected?

The IP clause provides that all rights in the product specifications and designs are reserved to the customer. A limited licence is granted to the manufacturer to make use of the designs for the purpose of manufacturing the products and fulfilling the manufacturer's other obligations.

IP rights in improvements may either be owned by the party that creates them, or by the customer.

Can the manufacture vary pricing during the term of the agreement?

An optional price variation clause is included. Variations may be limited in the following ways:

• only effective on certain dates (e.g. anniversaries of the date of signature);
• only effective after a defined notice period; and/or
• subject to increase caps (e.g. by reference to the UK Retail Prices Index).

Can I use this document in conjunction with my existing purchasing T&Cs, which cover matters such as delivery, insurance, risk and title?

Yes. These matters are all covered in one of the schedules, so it is relatively easy to insert your existing purchasing T&Cs into the document.

What happens under this agreement if the manufacturer makes improvements to the customer's product designs?

The document is not suitable for use (at least without substantial adaptation) in situations where the manufacturer is providing a full design service. However, a handful of optional clauses are included in the premium version relating to limited design services provided by the manufacturer.

These clauses assume that the manufacturer will only make improvements (or correct design faults) if expressly permitted or instructed to do so. Such design services may be made subject to the payment of additional charges.

The manufacturer may be expressly obliged to provide such design services with reasonable care and skill. In addition, the customer may expressly acknowledge that the efficacy of the product design remains within the customer's bailiwick, notwithstanding the provision of the design services.

Under the optional training clause in the longer template, does the customer provide the training to the manufacturer, or is training given by an outside provider?

Either possibility can be accommodated.

If we, as the client, are providing raw materials to the manufacturer, then will the manufacturer be fully responsible for those raw materials whilst they are at the manufacturing facility?

There are two alternative provisions in the premium agreement concerning risk in raw materials (the term 'component' is used in the template) whilst they are in the manufacturer's control. The first places all risk relating to such raw materials in the lap of the manufacturer; the second places risk in the lap of the customer, providing that the manufacturer fulfils its specific obligations under the agreement to take care of the raw materials (e.g. storing them properly, not selling them, not altering them except during the manufacture of the products, etc).

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