What is Manufacturing Agreement Negotiation?
A manufacturing agreement is a legal contract specifying that one party will supply goods to another. It outlines terms regarding work scope, quality standards, payments, and delivery.
If you need to negotiate terms in your manufacturing agreement, you might wonder how to approach the issue.
Read the rest of this article to explore key terms that are commonly negotiated in manufacturing agreements, what tips to consider when entering discussions, and how a lawyer is skilled at navigating the negotiation process.
What are Common Points of Negotiation in a Manufacturing Agreement?
Some key terms parties will negotiate in a manufacturing agreement include:
- Payment terms. This includes unit pricing, minimum order quantities, milestone payments, and late payment penalties.
- Volumes. This should outline production forecasts, such as in terms of minimum purchases, lead times, production schedules, and how to handle sudden demand increases or decreases.
- Quality standards. The agreement will outline quality standards and processes. This can include information about criteria for acceptance, testing requirements, and how audits are handled.
- Delivery. All terms related to delivery must be outlined and can be negotiated. This could include settling on delivery dates, milestones, and what consequences there are for late deliveries.
- Intellectual Property (IP) ownership. It’s common for IP negotiations to include protection against unauthorized production, confidentiality provisions, and clarity about ownership.
- Materials. What materials (such as tools and equipment) are required and who will pay for their costs must be agreed on to prevent delays or disputes.
- Changes. Parties might want to negotiate how to manage changes, such as engineering, design, and specification changes. It’s important to have clarity about how changes can be approved and implemented.
What are Tips for Manufacturing Agreement Negotiation?
When drafting a manufacturing agreement, you’ll want to discuss and negotiate terms to make them more favorable. Here are some tips on how to approach the negotiations.
Make Delivery Schedules Realistic
You want the product quality and service to be reliable, which is why you might want to negotiate some flexibility for any unforeseen delays and ensure reasonable delivery milestones to prevent disputes.
Use a Business Term Sheet
It’s advisable for parties involved in manufacturing agreement negotiations to draft a business term sheet beforehand. It outlines essential business terms that they’ve agreed to, serving to make negotiations smoother and more productive.
Consider Legal Changes
Make sure you and the other party agree on who bears responsibility for making changes to materials or processes. Consider how changes in the legal requirements that affect the agreement will be dealt with. In such cases, it might be more reasonable and fair for parties to split the costs.
Discuss Recalls
If a product needs to be recalled, there should be clarity in the agreement about how this process will be handled. Parties might want to establish a rejection window with a defined timeline to cap responsibility for claims.
Negotiate Beyond the Price
While it might be common to negotiate the manufacturing price, there are other payment terms you might want to discuss. These include materials and equipment costs, shipping expenses, and minimum order requirements.
These additional costs can also be considered if negotiating the manufacturing price doesn't provide results, giving you a fallback or second-best option during discussions.
Can a Lawyer Help You with Manufacturing Agreement Negotiation?
A manufacturing agreement can be complex and involve significant financial commitments, so it’s ideal to consult with a qualified lawyer for assistance with negotiating its terms.
Not only will a lawyer help you by reviewing the agreement but they can structure the deal and align the agreement with your commercial interests.
Here’s what a lawyer will do to help you with manufacturing agreement negotiations:
- A lawyer will identify risks that might be obvious, such as vague processes for defective products or weak quality obligations.
- They’ll ensure that all agreed-on terms are reflected in the manufacturing agreement.
- They’ll fight on your behalf for all-round IP protections, such as by defining who owns designs and manufacturing processes and who owns improvements.
- They’ll manage quality and product liability to protect your interests.
- They’ll avoid challenging situations when the agreement ends, such as by discussing notice periods, termination rights, and outstanding orders.
- They’ll ensure all negotiations are aligned with regulatory compliance, such as by addressing industry regulations, data protection duties, and environment obligations.
- They’ll avoid making mistakes during negotiations by identifying leverage points and knowing how to encourage balanced discussions.
- They’ll draft and review your manufacturing agreement to give you peace of mind that all terms are clear, specific, and legally valid.
Where to Find a Lawyer for Manufacturing Agreement Negotiation
If you’re unsure of how to approach negotiating terms in your manufacturing agreement, you should reach out to a qualified lawyer for assistance with the process. Instead of having to call traditional law firms in your area, you can make use of an online legal platform that makes it easy for clients to connect with a reputable, experienced lawyer.
ContractsCounsel is one of the largest online legal marketplaces that gives you access to a curated network of vetted lawyers who have experience in negotiating contracts to protect your interests. They can also draft or review your manufacturing agreement, should this be required.
On the user-friendly platform, selecting the most suitable lawyer for assistance is easy. You can review lawyer data provided by the platform for your convenience, such as the lawyers’ experience, credentials, rates, and client ratings for previous projects they’ve completed on the platform. This transparency makes finding and hiring a lawyer a smooth, easy process.