This is an agreement for the supply of goods for business-to-business transactions. 

While standard terms and conditions for the supply of goods are suitable for many ongoing supply arrangements, there may be advantages to putting a formal supply of goods agreement in place in certain circumstances.

A supplier may be keen to put a formal agreement in place for some or all of the following reasons:

  • To establish long-term business continuity
  • To assist forward planning of the use of product manufacturing lines
  • To keep out the competition
  • To cover high product start-up costs
  • To allow stockpiling in low seasonal demand periods in the knowledge of sure sales

A customer will be motivated by some or all of the following:

  • Bigger price discounts and rebates
  • Security of supply
  • Preferential ordering and delivery timescales
  • Exclusivity of supply