Supply Agreement Template
A solid supply agreement protects your business from late deliveries, quality issues, and pricing disputes. Here is what every UK supply contract needs.
Last updated: February 2025
Core Elements of a Supply Agreement
A supply agreement governs the purchase and delivery of goods or services from a supplier. It should clearly define what is being supplied, the quality standards expected, pricing, and delivery terms. For UK businesses, the Sale of Goods Act 1979 and the Supply of Goods and Services Act 1982 provide the legal backdrop.
- Specification: detailed description of goods or services including quality standards and acceptance criteria
- Pricing: fixed price, price escalation clauses, or pricing reviews at agreed intervals
- Delivery: lead times, delivery location, risk transfer point (typically on delivery), and partial delivery rules
- Volume: minimum order quantities, maximum capacity, and forecasting obligations
Quality, Inspection, and Rejection
Quality clauses protect the buyer from receiving substandard goods or services. The contract should define the inspection process, the timeframe for raising defects, and the remedies available including repair, replacement, refund, or credit.
- Define quality standards and reference any applicable British Standards or ISO certifications
- Specify the inspection period after delivery during which defects must be reported
- Set out remedies for non-conforming goods: repair, replacement, or refund at the buyer's option
- Include a right to reject goods that do not meet specifications within a reasonable time
Termination and Supply Chain Protection
Supply agreements should include protections against disruption, including alternative supplier provisions and force majeure clauses. The COVID-19 pandemic and Brexit-related supply chain issues demonstrated the importance of robust supply contract terms.
- Include termination for convenience with a reasonable notice period, typically 3 to 6 months
- Allow immediate termination for persistent quality failures or material breach
- Force majeure clause covering natural disasters, pandemics, government actions, and supply chain disruption
- Consider requiring suppliers to maintain business continuity plans and adequate insurance
Key Takeaways
- Supply agreements must clearly define specifications, quality standards, and what happens when goods do not meet requirements.
- Pricing clauses should account for inflation and raw material cost changes, especially for long-term contracts.
- Post-Brexit and post-pandemic, force majeure and supply chain resilience clauses are essential.
Frequently Asked Questions
When does risk transfer from supplier to buyer?
Unless the contract specifies otherwise, risk typically transfers on delivery under the Sale of Goods Act 1979. For international supply, Incoterms (such as FOB, CIF, or DDP) define the exact point of risk transfer. Always specify the risk transfer point clearly in the contract to avoid disputes.
Can I change suppliers if I have a long-term supply agreement?
This depends on the contract terms. Most well-drafted supply agreements include a termination for convenience clause allowing either party to exit with notice, typically 3 to 6 months. Without such a clause, you may be locked in for the full contract term unless the supplier breaches the agreement.
Should I include exclusivity in a supply agreement?
Exclusivity can benefit both parties — the supplier gets guaranteed volume and the buyer gets preferential treatment. However, exclusivity carries risks if the supplier fails to perform. If including exclusivity, build in performance benchmarks and a right to source from alternatives if the supplier fails to meet them.
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Get Started FreeThis is guidance for UK businesses, not legal advice. For complex legal matters, consult a qualified solicitor.
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