Materials and Raw Materials Supply Agreement

The master agreement can establish general rules, forecasts help suppliers plan capacity, and binding orders establish mandatory quantities and deadlines. Without a clear document hierarchy, a commercial estimate can be mistaken for a purchase commitment.

For sensitive supply chains, the agreement must provide for notice of capacity shortages, quantity allocation and alternative supply scenarios.

Technical schedules must be treated as part of the agreement, with version control and a change procedure.

• Product specifications, tolerances, samples and applicable standards.
• Forecasts, minimum orders, reserved capacity and cancellations.
• Price, currency, taxes and an objective indexation formula.
• Delivery location, transport, packaging and transfer of risk.
• Inspection, acceptance, latent defects, quarantine and complaint deadlines.
• Traceability, certificates, audits and compliance duties.
• Penalties, recovery of price differences and liability limits.
• Force majeure, hardship, continuity and termination.

A clause allowing suppliers to change prices according to the market offers no predictability. A formula can use a public index, raw-material weightings, exchange rates, energy or transport, with thresholds, frequency and supporting documents.

The agreement must state what happens if the index disappears, changes exceed a threshold or parties cannot agree: temporary continuation, renegotiation or termination rights.

The legal team needs the same technical documents used by procurement and quality control.

• Relevant specifications, drawings, samples and certificates.
• History of orders, forecasts and delivery incidents.
• Cost structure and proposed adjustment indices.
• Internal acceptance and testing rules.
• Production-stoppage impact and alternative supply options.
• ESG, traceability, security or sector-specific regulatory requirements.