Businesses commonly have arrangements with suppliers so that they have goods to sell. This is most often captured in a Supply Agreement.
However, there is also the question of whether the supplies are for a one-off project, or for an ongoing arrangement. If it is for an ongoing arrangement, the details of the supply will usually be the same, such as price and delivery location.
As such, it makes more sense for businesses to have one simple agreement that covers these repetitive details to increase efficiency and save time, rather than having to draft a new agreement every time.
This is known as a Framework Agreement. Let’s discuss this in more detail below.
How Do You Define Framework?
In its most general sense, framework refers to a structure. In the context of Supply Agreements, a Framework Agreement means it caters to an arrangement that is repetitive and structured, meaning there is little to no variation in terms each time the supply or delivery of goods occurs.
What Is A Framework Agreement?
Like we mentioned before, a Framework Agreement is most suitable for relationships between a buyer and supplier where the terms of their arrangement are usually the same each time. So, having a Framework Agreement saves you the time of drafting new terms for each project.
In other words, a Framework Agreement requires both parties to agree to these terms at the beginning of their relationship, and it applies to the recurring projects.
Every time an order is made, the terms of the initial Framework Agreement apply.
What Is The Difference Between A Framework Agreement And A Master Services Agreement?
A Framework Agreement is similar to a Master Services Agreement, as both documents seek to remove the need to draft a new contract for every order.
Like a Framework Agreement, a Master Services Agreement is used for parties who engage in a project or order multiple times, so the Agreement’s head terms are used for each of these small engagements in future.
However, there is a slight difference – unlike a Framework Agreement, a Master Services Agreement is slightly stricter in the way the original terms apply to future transactions.
What Is A Supply Agreement?
A Supply Agreement sets out the terms under which a supplier will provide certain goods to a business (the buyer).
For example, it should cover the roles and responsibilities of each party, what happens if goods are damaged, how disputes will be handled, how payment will work and how liability can be limited.
What If I Work With Overseas Suppliers?
With businesses expanding globally so often these days, it’s common business practice to work with overseas suppliers.
If you’re engaging overseas suppliers, consider the following:
- Delays in shipping
- Liability – who is responsible if things go wrong?
- Force majeure clauses – what happens if your supplier defaults?
- Minimum order quantity – what is the minimum amount you can purchase from suppliers?
- Import/Export Agreement – what are the terms around imported goods from your suppliers?
- Disputes – how can you ensure your contracts are internationally enforceable?
What Should I Include In A Framework Agreement?
A Framework Agreement should be drafted carefully, as these terms will apply to numerous transactions.
Firstly, the Agreement should make it 100% clear that it is a Framework Agreement, and as such, its terms (once accepted) will apply to each order.
The other terms should cover:
- How orders will be issued
- How orders will be accepted
- How the agreement can be terminated
Framework Agreement Vs Contract
In the list above, you may have noticed that the terms aren’t as specific as those you would include in a standard contract.
Since Framework Agreements are designed to specify the applicability of core legal terms at the beginning of the business relationship, the specific terms such as payment and scope of work are usually not common.
Rather, these more specific details are useful in contracts.
Are Framework Agreements Worth It?
Framework Agreements are great for government entities. This is because they often offer projects to the public, and Framework Agreements make it a lot easier to offer multiple proposals with minimal variations to the terms.
It also helps foster healthy, long-term business relationships and removes the stress of drafting new contracts for each order.
Can A Framework Agreement Help Supply Chain Issues?
Yes, Framework Agreements can be useful for helping any supply chain issues. This is because the Agreement makes the process more efficient.
The supply chain can come with some obstacles or unexpected delays, so having an overarching agreement with standard terms that apply to multiple subsequent orders saves a lot of time when sorting out these issues .
Since parties are bound by the same terms that they agreed to at the start, there is little room for legal hiccups or mistakes due to any changes or misunderstandings around the terms.
Do I Need Terms And Conditions As Well As A Framework Agreement?
You may also be thinking about having simple Terms and Conditions for your business when it comes to orders and supplies.
Terms and conditions are helpful for many situations, as they require people to agree to certain terms before they can further engage with your business .
However, a Framework Agreement is a more secure way of doing this if you’re looking at something more long-term. Terms and Conditions may be more suitable if you’re not offering multiple, subsequent projects.
In fact, it may be more appropriate for a one-off project. It all depends on you and the nature of your business activities.
If your business is working with suppliers on multiple projects with similar details or arrangements, it may be more efficient for you to have a Framework Agreement.
This saves you and the other party heaps of time and stress when it comes to the smaller details of your long-term business relationship.
If you need help, chat to our expert contract lawyers. With years of experience in various types of commercial contracts, they’re ready to help you make legals simple.
If you would like a consultation on your options going forward, you can reach us at 1800 730 617 or firstname.lastname@example.org for a free, no-obligations chat.
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