What Is A Dropshipping Agreement? (2025 Updated)

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Are you thinking of setting up an online store? Dropshipping remains a popular way for aspiring business owners to dive into the eCommerce space in 2025 without having to deal with the challenges of holding stock for their customers. With the latest logistics technology and real‐time tracking systems, today’s dropshipping model offers greater transparency and efficiency than ever before.

What Is Dropshipping?

Dropshipping is a business model that involves three main parties:

The seller
The manufacturer
The customer

The key difference between a dropshipping arrangement and an ordinary eCommerce store is that the seller does not physically hold or inspect the goods that customers purchase via the online store. Instead, once an order is placed, the manufacturer ships the goods directly to the customer. In 2025, enhanced digital tracking and automated fulfilment processes mean you can monitor deliveries in real time, ensuring a smoother customer experience.

If you’re planning to launch a dropshipping business, it’s essential to have a Dropshipping Agreement in place as part of your risk management strategy.

What Is A Dropshipping Agreement?

A Dropshipping Agreement is a legally binding contract between the seller and the manufacturer of goods. If you’re a seller looking to partner with a manufacturer to support your business, getting this agreement drafted is crucial – particularly as supply chains have become more complex in 2025.

This agreement sets out the key terms of the arrangement between you and the manufacturer, including pricing, delivery timelines, quality control, and dispute resolution. It may also detail provisions for digital data sharing and enhanced tracking methods. For advice on the basics of contract law, you might consider reading our guide on what makes a contract legally binding.

A Dropshipping Agreement is fully customisable and can be drafted to protect the interests of all parties involved – the seller, the manufacturer, and ultimately the customer. It is wise to include clauses that cover intellectual property rights and supplier obligations. For further guidance on protecting your business assets, explore our article on protecting your IP.

What Should I Include In A Dropshipping Agreement?

If you’re looking to have a Dropshipping Agreement drafted, here are some of the main areas you must consider:

Prices

As a seller, generating profit is key to a successful business. In 2025, market conditions and currency fluctuations mean that it is more important than ever to clearly define how prices are set. The wholesale price of the goods you purchase from the manufacturer must be low enough to allow you to generate a healthy profit margin, and provisions for market-driven price adjustments should be included.

Delivery Standards

In a dropshipping arrangement, you have limited control over the supply chain because you are not directly responsible for shipping the goods. Nonetheless, it is vital to negotiate strong delivery standards in your agreement. Be sure to include clear terms regarding shipping, handling, and delivery performance. With advances in logistics in 2025, many manufacturers now offer real-time tracking and expedited shipping options – details that should be clearly reflected in your contract. For further information on setting comprehensive shipping terms, check out our online shop terms and conditions guide.

Defects Rectification

What happens if a customer is unsatisfied with a product? If a customer wishes to return or exchange an item, your agreement must include policies that govern these scenarios.

If a manufacturer fails to provide a reliable returns or exchange policy, the seller could be left liable for replacing defective products. This risk is unique to dropshipping because, unlike traditional retail models where you control inventory and can inspect quality in advance, you rely entirely on your manufacturer’s processes. In 2025, it is more important than ever that your manufacturer provides either a warranty on their products or has a comprehensive Returns & Exchange policy in place.

Legal Considerations For New eCommerce Stores

Entering the eCommerce world in 2025 can feel overwhelming. Sprintlaw lawyer Regie Anne has recently discussed updated legal considerations for new online stores – from choosing the right business structure to drafting robust privacy policies and terms of use. For additional insights into structuring your online business, you may want to review our guide on starting a business from home.

Before adopting a dropshipping model, it is beneficial to familiarise yourself with both the opportunities and the challenges posed by modern eCommerce. Updated legislation, consumer guarantees, and digital privacy obligations all hold significant implications for your business. For a broader overview of the legal requirements for starting a business in Australia, see our article on what are the legal requirements for starting a business.

Need A Dropshipping Agreement?

Dropshipping is a complex arrangement and it’s crucial to have a professionally drafted Dropshipping Agreement if you’re embarking on this type of business. Our team can help answer any questions you have about dropshipping while drafting an agreement that is tailored to your unique business needs. For further reassurance, you might also explore our contract review and redraft services to ensure all your documents are up to date with 2025 standards.

In today’s fast-evolving digital marketplace, keeping your legal documents current is essential. Whether you need further advice on formulating robust delivery standards or clarifying your liability in defects rectification, Sprintlaw is here to help. For more detailed guidance, visit our pages on contractors’ agreements and other specialised contracts tailored for online businesses.

Esha Kumar

Esha is a law graduate at Sprintlaw from the University of Sydney. She has gained experience in public relations, boutique law firms and different roles at Sprintlaw to channel her passion for helping businesses get their legals sorted.

Embeth Sadie

Embeth is a senior lawyer at Sprintlaw. Having previously practised at a commercial litigation firm, Embeth has a deep understanding of commercial law and how to identify the legal needs of businesses.