Manufacturing Contracts and Agreements for Legal and Business Professionals

We get a ton of visitors to our sites looking for templates for manufacturing contracts and agreements, as well as supply agreements.  The reason is pretty straight-forward – we have thousands of these agreements that are categorized and easily searchable among the millions of searchable legal agreements and contracts at RealDealDocs.com.  But what are they, and why is it so important for lawyers and top management to find and leverage these types of legal documents?

Manufacturing contracts involve the outsourcing of the creation of tangible products by one company to another.  This of course really means that one company is hiring another to manufacture products for it, but my 5th grade English teacher taught me that a definition can’t include the word to be defined, so I had to mix it up a bit.  In any event, the ability to successfully utilize outsourced manufacturing capacity is a critical component of a company’s competitive advantages, and the components of these successful relationships are imbedded in the manufacturing agreement itself.

Key business or term sheet elements of a manufacturing contract include:

1. Pricing terms, including base pricing, volume-based adjustments, forecasting issues, and other pricing factors
2. Volume production / purchase commitments, including whether there are any manufacturing minimums
3. Payment terms
4. The contract length
5. Any intellectual property / technology development issues, such as technology transfer or ownership issues
6. Exclusivity or non-exclusive production, both of which are loaded issues for the parties
7. Quality assurance, including the potential impact of recall issues, which have hit the headlines in the past 12 months, particularly with regard to children’s toys

Once the business terms are established as a baseline for the negotiation and drafting of the manufacturing contract, the lawyers can take over on the legalese.  That being said, it’s always helpful to consult other manufacturing contracts as a reference point, and as I mentioned previously, you can find thousands of manufacturing contracts at RealDealDocs.com.

Consulting Agreements for Small Business

At our business (Practice Technologies Inc, a technology and content provider for law firms and business professionals), we’ve recently updated our consulting services agreements in conjunction with kicking off two new consulting engagements.  One of the consulting engagements will be with an individual, the other is likely to be a search engine optimization project with a company specializing in those activities.  I thought I’d share some of the key issues in retaining both individuals and companies in consulting agreements and contracts.

In any consulting agreement, basic terms include:

• A description of the services to be provided by the consultant 
• Compensation terms, including timing of payments
• Some type of performance metrics or specific deliverables are very desirable, although I’ve frequently seen them left out of far too many consulting agreements
• The usual representations and warranties of both the company and the consultant
• A clear statement that the engagement is on an independent contractor basis (not as an employer-employee relationship)
• Termination provisions, including a discussion of how disputes are to be resolved
• Liability limitations (usually to the benefit of the consultant)

Depending on the work to be performed, it can be essential that the Company also obtain specific assignments of any intellectual property that is created by the consultant which would otherwise belong to the consultant under intellectual property law.  This can be done either within the body of the Consulting Services Agreement itself, or in a separate Intellectual Property Assignment Agreement.

When working with a company as the service provider, or even with an individual, it is my experience that the consulting agreement should be carefully negotiated to make sure that the termination provisions, particularly the notice period, appropriately reflect how the end game should be played out.  That seems rather self-evident, but I’ve seen that provision overlooked in the drafting phase, usually resulting in the service provider being paid for too long a period following the realization that the engagement is not working out for the client company.

For those of you who follow my blog posts, you’ll note that I’m a big advocate of leveraging the legal drafting work of others, particularly when it comes to drafting legal agreements and contracts.  I’ve provided some links to literally thousands of consulting agreements that have been drafted by large law firms for big and small companies alike.