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Whenever you engage in business with anyone, it’s a good idea to have a contract in place. But why?
Generally, having a contract is a formal way of making sure that both parties are on the same page as to what you’ve agreed upon.
And, if you’re providing supplies to anyone in a wholesale arrangement, you’ll need what we call a Wholesale Agreement.
You might otherwise call it a Supply Agreement, a Manufacturer Agreement, or even a Distribution Agreement. But, for a Wholesale Agreement, there are some specific clauses you’ll need to think about.
And, as with any business, you’ll need to make sure you have a contract that is suited to your business’ specific needs.
What Is A Wholesale Agreement?
A Wholesale Agreement is essentially a contract between the suppliers and customers of a wholesale deal or transaction.
Whenever you are selling products to someone at wholesale price or in bulk, you need a Wholesale Agreement.
What Is Included In A Wholesale Agreement?
A Wholesale Agreement will generally have similar terms to other types of Supply Agreements, such as:
- Delivery: what is the estimated delivery time for each order?
- Payment: how does payment work? What happens if an invoice isn’t paid?
- Intellectual Property: what are the ground rules around using your logo, or your brand, when distributing the products to others?
- Termination/Cancellation: what happens when you want to end the contract? What if a customer wants to cancel an order?
But, in a Wholesale Agreement, you might also have additional clauses around:
- Minimum Order Quantities (MOQ)
- Minimum Order Value (MOV)
- Exclusivity
These terms are common in most wholesale arrangements — so, why are they important?
Put simply, a MOQ establishes a minimum requirement for how many products someone can order.
A MOV will then set out the minimum requirement for the minimum price an order can cost.
This provides better protection for wholesalers who are selling their products at a lower, wholesale price in bulk. It allows you to get the most out of each order by providing value to your customers who buy the products at a lower price. In turn, you can request a minimum amount or quantity they can order.
Further, most wholesalers usually want an exclusivity term in their contract. In competitive industries, this ensures that your clients will only have their supplies ordered from your wholesale business — locking in a valuable, long-term relationship.
And, in some cases, a Wholesale Agreement might have additional clauses around a minimum commitment period. For example, you might want some of your customers to commit to ordering your supplies for a minimum of 3 months. This ensures that you have continued revenue streams and lasting relationships with customers.
Why Do I Need A Wholesale Agreement?
Ultimately, approaching a lawyer to put together a Wholesale Agreement is a long-term investment for your business.
If you speak with an experienced lawyer, they’ll walk you through the key terms to include in your Wholesale Agreement to get the best commercial deal out of your transactions.
And, if the lawyer is experienced with Wholesale Agreements, they’ll be able to tell you the common problems associated with Wholesale Agreements (and how to avoid them!).
Beyond this, a good lawyer will draft your contract to limit your liability and protect your business from as many risks as possible — especially if you’re taking on large, bulk orders from international clients.
Need Help With A Wholesale Agreement?
A Wholesale Agreement is a great investment in your business if you want to make sure you get the best deal in your contract.
Beyond that, having a contract in place will also limit your liability to protect your business from any disputes or problems down the track.
At Sprintlaw, we’ve helped a number of businesses have their Wholesale Agreements drafted — and we’re here to help!
If you’re ready to have a Wholesale Agreement drafted, or if you’re not quite sure where to start, don’t hesitate to reach out to us.
You can reach us at team@sprintlaw.com.au or give us a call on 1800 730 617 for a quick chat with one of our legal consultants.
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