Manufacturing Contract Terms

If your business is having goods manufactured by third party manufacturers, then it is vital to have the terms on which that service is carried out for you. Net Lawman has developed a series of legal templates that are designed to help tie down the contractual basis for such deals.

Read what Net Lawman says about its templates and the type of things to be covered in manufacturing agreements and then look for a template that suits your needs, or which you feel can be readily adapted to suit them.

"Extensive contracts for the manufacture of goods

These are full version contracts that cover not just manufacture of goods, but in most documents, additional services that may be provided by the manufacturer: help with development and prototyping, finishing and assembly, and packaging.

Each agreement template provides you with a template suitable for the transaction described. It is not just a barebones legal contract. We have also taken a commercial view of what you will need. We take you step by step through the process of how your deal will work.

However, because these agreements could be used so widely, we have not included industry-specific requirements. However, you can edit the documents easily to cover any terms specific to your trade or to your circumstances. Most industry-specific additions will relate to technical and regulatory requirements.

Use of a specification of work

In any contract for manufacturing, both sides must agree what work is to be done. The best way to cover this is to attach a specification to the document as a schedule. You do not have to call it a schedule, but it is essential that you bring it into the agreement by referring to it in a way that no-one can misunderstand. The style and layout does not matter.

It is likely that the specification will be discussed and negotiated to a far greater extent than the rest of the document. For this reason it is a good idea for both sides to sign somewhere at the bottom of each paper page. There is then no scope for pages to be changed. (That happens accidentally far more often than intentionally). Under UK law it is of course possible to create a binding contract by reference by email, usually as an attachment. However, if multiple versions have been discussed, it is still far safer to rely on paper!

A master contract for repeat work if required

Sometimes, you need a contract for a single deal. At other times, you want to be able to repeat the same business without having to change the terms already agreed. These contracts can all be used for repeat work.

When you have edited the document to your requirements and agreed terms with your counter party, just sign it and exchange parts. That covers your present deal.

If you want to deal with that same party later, on another contract, you can exchange letters or messages with the specification for the new work and refer to the date of this agreement and that the new contract is subject to it. That is all. No special words are required. It just has to be simple and clear. If you do want to change the terms as well, it is usually better to create a new contract by editing your old one.

Strong and extensive intellectual property protection

Today, every business has a vast amount of IP. Think of patents, specifications, know-how, customer lists, manufacturing and marketing records, service records, designs, drawings.

Many lawyers fail to understand the extent and the ease with which someone can steal your IP or the many ways a stranger could use it. We cannot stop theft, but we certainly make sure your intellectual property is strongly protected in these contracts. That serves to assert ownership as well as avoiding disputes with your counter-party.

Another area we cover simply but thoroughly is to give you options on what happens to new intellectual property created in course of development. Who will own a new process, a varied product, a design not used, or a derived product?

If you are concerned about IP issues, you may need to support your manufacturing agreement with an agreement relating specifically to intellectual property.

If your counter party is outside the UK

There is no reason why you should not use any of these agreements to regulate a deal with a counter party abroad. All are binding on a foreign business if you use an English, Welsh or Scottish court.

Please note however, that none covers specific international trade issues. Where appropriate, the agreements cover transportation, with all incoterms offered, but not export licenses, import regulations and taxes, refrigeration and so on. 

Furthermore, a contract with a company in another EU country may be subject to additional EU rules. For all of these, you should consult your local chamber of commerce.

Other matters covered in these manufacturing agreements

Here are just some of the provisions we have included, so far as they apply. These points do not apply to every contract version in the same way. Our aim is to produce a document for a purpose - albeit a wide purpose.

The most important provisions are:

• Manufacturer’s warranties

These cover corporate status, identity, qualifications and whatever else you wish to add. That way, you know who you are dealing with.

• Scope of work

This sets out what exactly is the deal. It is not a full specification, but rather describes the main steps you expect from your counter-party.

• Design price and payment

We know that design acceptance is a critical part of a manufacturing contract. A specification cannot usually be precise and complete without prior acceptance of design. That means you will need a process for designing, prototyping, submission for testing and quality assurance - all before a product can be produced in market quantity.

• Cost allocation: who pays for what at each stage of development
• Extensive menus for dealing with transportation and delivery   
• A provision to compel the manufacturer to agree to show his plant and facilities to your potential customers or regulatory bodies
• Use of sub-contractors: who, when, and how security is arranged
• An option to cancel the contract if ownership of the manufacturer’s business changes
• Confidentiality
• New designs: who owns in what circumstances
• Rules for publicity and / or announcements"

Detailed guidance notes are provided with each template. Net Lawman offers a money back guarantee if the document is not what you need, as well as a legal review option if you want some professional assistance when you are drawing up your documents.

Notice:

The documents menus are designed to describe the documents, but please be sure that you check them over carefully to ensure that they do meet your needs. All documents are subject to Net Lawman's Terms and Conditions, which we ask you to read before you purchase any documents.

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