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Document Information Document Name Sole Source and Supply Agreement Chapter Sale of Goods Chapter Editor Stephenson Harwood 1 October 2004 Copyright LegalS Ltd. 2004. Please consult your product licence agreement. 1 SUPPLY AGREEMENT TABLE OF CONTENTS 1.DEFINITIONS.2 2.SUPPLY AND PURCHASE.3 3.PURCHASE ORDERS .4 4.SPECIFICATIONS.5 5.INSPECTIONS AND TESTING.5 6.INTELLECTUAL PROPERTY RIGHTS .6 7.BUYER MINIMUM ORDER CRITERIA .7 8.TECHNICAL SUPPORT.8 9.PRICE.8 10.PAYMENT.9 11.INABILITY TO SUPPLY.11 12.DELIVERY.11 13.INSURANCE AND RISK OF LOSS .12 14.TAXES.13 15.TITLE.13 16.TERM AND TERMINATION .13 17.WARRANTIES AND INDEMNIFICATION.15 18.CONFIDENTIALITY.18 19.NO WAIVER.19 20.NOTICES.19 21.FORCE MAJEURE.20 22.INDEPENDENT CONTRACTORS.21 23.MISCELLANEOUS.22 24.ASSIGNMENT.22 25.ENTIRE AGREEMENT.22 26.AMENDMENTS.22 27.HEADINGS.22 28.SEVERABILITY .23 2 29.APPLICABLE LAW AND JURISDICTION.23 EXHIBIT A: PRODUCT LIST.25 EXHIBIT B: PRODUCT DEMAND FORECAST.25 EXHIBIT C: SPECIFICATIONS.25 EXHIBIT D: PRICE LIST .25 1 THIS SUPPLY AGREEMENT is made on the day of , 20 1 BETWEEN: Supplier:Name of Supplier (a company incorporated in, and existing under the laws of, ) Address Legal Representative (“Supplier”) Buyer:Name of Buyer (a company incorporated in, and existing under the laws of, ) Address Legal Representative (“Buyer”). WHEREAS: A.Supplier carries on business as a developer, manufacturer and Supplier of Type of Product(s); B.Buyer carries on business as a retailer of the product(s) described in recital A (the “Products” manufacturer of Type of Finished Product(s) incorporating the product(s) described in recital A; C.Supplier has agreed to sell to Buyer the aforesaid product(s) on the terms and conditions hereinafter appearing; and D.After consultations, the parties agree that Buyer will purchase all of its requirements for the Products from Supplier.2 NOW, THEREFORE, after reaching a consensus through consultations conducted on the basis of the principles of equality, free will and good faith, the parties conclude the following agreement:3 1 Supply contracts are a type of sale and purchase contract. The main points which distinguish a supply contract from a general sale and purchase contract are that the former specifies the method for determining the minimum purchase quantity by the Buyer and the minimum sales price for the subject matter of the contract during the term of the contract. 2 Optional recital if Supplier is the major or sole source provider to Buyer. There are several clauses in this agreement that are specific to major or sole source providers. 3 Despite the fact that contractual freedom is one of the most important principles of the Contract Law and that the terms of a contract may be freely stipulated by the parties thereto, the issues of whether the terms of the contract are complete and whether its provisions are specific and explicit will to a great extent determine whether it enters into effect, whether it will be performed smoothly and ultimately whether the objective of the contract will be achieved. On the other hand, the principle of contractual freedom is subject to limitations, e.g. contracts which are concluded on the basis of a major misunderstanding and contracts which at the time of conclusion were manifestly unfair can be amended or cancelled; Sino-foreign equity joint venture contracts, Sino-foreign cooperative joint venture contracts and contracts for the Sino-foreign cooperative exploration and development of natural resources performed in the Peoples Republic of China may only be governed by the laws of the Peoples Republic of China; furthermore, the parties to such contracts are not permitted to freely 2 1.DEFINITIONS 1.1Affiliate shall mean (i) a corporation performing activities relating to Buyers business in which Buyer owns and controls, directly or indirectly, at least fifty percent (50%) of the outstanding shares entitled to vote for the board of directors; (ii) a franchisee or licensee of Buyer; or (iii) a joint venture with a third party (x) which joint venture performs activities relating to Buyers business, and (y) in which Buyer owns or controls at least twenty percent (20%) equity interest. 1.2“Products” shall mean Suppliers Product for Insert description, as more fully described in Exhibit A. The parties agree that, from time to time and subject to mutual agreement, the parties may amend the Products list and descriptions in Exhibit A. When used without capitalization, the term products replace products with other term as necessary shall refer to products generally and not just those manufactured by Supplier. 1.3Intellectual Property shall mean all rights of a person or entity in, to, or arising out of: (i) any patent (including inventions, utility models and designs); (ii) well-known trademarks and registered trademarks (including product trademarks, service marks, collective marks and certification marks); (iii) copyrights and other rights relating thereto; and (iv) any intellectual property protected by other laws4. 1.4Specifications means the specifications for the Products, as set forth in Exhibit A. 1.5Purchase Order means a written order from Buyer (or any of its Affiliates) delivered to Supplier requesting Supplier to manufacture and sell the Products and stating the proposed unit numbers and specifications of the Products, the location at which the Products will be installed (if any) and any special conditions thereof that might affect the manufacture, installation or testing of the Products, shipping instructions, any request for Supplier to supply labour for installation, a requested testing schedule and procedure, and the requested delivery date. The Purchase Order may also include a reference to a Technical Proposal sent by Supplier to Buyer, including such information as price, scope of work, system functionality, and delivery schedule. select the law that is to govern the resolution of contractual disputes. According to Articles 12 and 131 of the Contract Law, the main terms of a sale and purchase contract include the following particulars: the names of the parties and their domiciles; the subject matter; quantity; quality; price or remuneration; term, place and method of performance; liability for breach of contract; method of dispute resolution; packaging method; inspection standards and method; settlement method; the language of the contract and its effectiveness. 4 Traditional intellectual property was restricted to patents, trademarks and copyrights. However, in modern intellectual property law, intellectual property has been greatly expanded, e.g. computer software. The term “other laws” includes laws, statutes, measures, regulations, etc. of the Peoples Republic of China and international conventions to which the Peoples Republic of China is a party. 3 2.SUPPLY AND PURCHASE 2.1On and subject to the terms and conditions of this Agreement, Supplier agrees to manufacture and sell to Buyer and Buyer hereby agrees to purchase from Supplier, all not less than _ per cent (_%) of Buyers annual requirements for the products described or listed in Exhibit “A” to this Agreement (“the Products”). 5Optional Clauses For Supplier and Buyer Exclusivity (2.2 and 2.3): 2.2Supplier Exclusivity. Provided that Buyer fulfils all its obligations pursuant to this Agreement, Supplier shall not, without Buyers prior written consent, sell or supply (or permit any other person or entity to sell or supply) any Products to any third party in Territory carrying on business which is competitive or may compete with that carried on by Buyer.6 2.3Buyer Exclusivity and Sole Source. For so long as Supplier manufactures and sells to Buyer its required supply of the Products, Buyer agrees to purchase all of its requirements of the Products from Supplier. If Supplier fails to provide Buyer with all its required supply of the Products ordered pursuant to this Agreement on any particular Purchase Order on the delivery dates reasonably required by Buyer, such failure shall not be considered a breach of this Agreement but will entitle Buyer to purchase enough equivalent products from a third party to fulfil the particular Purchase Order. The foregoing notwithstanding, subject to Buyers fulfilling its obligations set forth in Section 7 (Buyer Minimum Order Criteria) of this Agreement, Suppliers obligations pursuant to Section 2.2 shall remain in full force and effect. 2.4Buyer Forecast. Buyer estimates that its requirements for the Products in the years ending , 20 to 20 will be as set out in Exhibit “B” Product Demand Forecast, to this Agreement. OR 2.5Forecasts. Buyer shall provide Supplier with a forecast of its requirements for Products in respect of each calendar month during the continuance in force of this Agreement. Each such forecast shall be provided not later than months prior to the calendar month to which it relates. It is expressly acknowledged by the parties that all such forecasts shall be indicative 5 These optional clauses are appropriate for the drafter that wants to include more specific language and provisions regarding supplier exclusivity and buyers agreement to buy only from supplier provided that supplier can provide sufficient capacity. Clause 2.6 covers the issue of sufficient capacity without reference to exclusivity. 6 Note that it is assumed that the drafter will include this clause in their final contract. Clause 2.2 is referenced throughout this model contract, in clauses 2.3, 6.3, 7.1, and so on. If Clause 2.2 is deleted, the drafter will also need to revise or even delete these other clauses. 4 of Buyers estimated requirements, but shall not constitute legally binding purchase orders for the purposes of clause 2 of this Agreement. 2.6Supplier warrants to Buyer that it will make available sufficient manufacturing capacity ensure supplies of sufficient quantities of Products to satisfy all of Buyers requirements in all both such years provided that Buyer gives Supplier not less than Period written notice prior to the commencement of each such year of its intention to purchase its entire requirement for the Products from Supplier. Optional Clause Regarding Product Permits: 2.7Permits. Prior to the installation of the Products, Buyer shall procure and pay for all necessary licenses, permits, authorisations and inspections required in connection with the Products. Supplier shall not be responsible for any failure of the Products or their installation to comply with codes, regulations, standards of appropriate government agency or department. 3.PURCHASE ORDERS 3.1All supplies and purchases of Products pursuant to this Agreement shall be made in accordance with individual purchase orders placed by Buyer with Supplier. Acceptance by Supplier of any such purchase order shall be indicated by written7 acknowledgement thereof by Supplier. In the event of any conflict between the terms and conditions of any purchase order and the terms and conditions of this Agreement, the latter shall prevail subject to the express agreement by the parties that the former should prevail. 3.2Cancellation of Purchase Order. Buyer shall have the right to cancel any purchase order or part thereof by giving written notice to Supplier not later than thirty (30) days after such purchase order was placed. In such event, Supplier shall cease all work in relation to such cancelled purchase order but shall be entitled to receive from Buyer, subject to the production of such documentary evidence as Buyer may reasonably require, reimbursement of costs incurred by Supplier in connection with preparatory work undertaken prior to the giving of such written notice including, without limitation, materials and labour costs. 3.3Personnel for Installation or Other Assistance. Any request that Supplier supply labour at the delivery site(s) for installation or other assistance shall be stated in the Purchase Order and the cost of such labour, including any premium for overtime, shall be negotiated for each order. 7 Pursuant to Article 11 of the Contract Law, the term “in writing” refers to a form which is capable of tangibly representing its content, such as written instruments, letters and data messages (including telegrams, telexes, facsimiles, electronic data exchange and e-mail messages). 5 4.SPECIFICATIONS 4.1Products shall meet the specifications stated in Exhibit “C” to this Agreement or such other specifications as the parties may at any time agree in writing. The parties acknowledge that such specifications may need to be adjusted based on performance/ quality testing at Buyers plant. Supplier undertakes to give to Buyer not less than months prior written notice of any changes to its its suppliers processes or raw materials used in the manufacture of the Products, and shall consult Buyer in relation to any possible adverse effects on the Products Buyers manufacturing processes and not implement any such change without Buyers prior written consent. 4.2Notwithstanding clause 4.1 of this Agreement, Supplier shall have the right to adjust the specifications of the Products at any time without Buyers prior written consent if such adjustment is required to comply with any law or regulation of any kind whatsoever. 4.3Changes, Delays. At any time prior to delivery, Buyer may request in writing any substitutions, deviations, additions, or deletions (hereinafter referred to as Changes) in the Products and in the specifications or drawings incorporated in this Agreement or the Purchase Order. All of the terms and conditions of this Agreement shall apply to such Changes. If Suppliers performance is delayed by any such Changes or by other causes within control of Buyer, Buyer agrees to reimburse Supplier for reasonable and documented expenses incurred as a result of such delay, including without limitation, the costs of storing, maintaining, repairing, and refurbishing Products, demurrage, labour and material escalation and pull out charges. Upon request by Buyer, Supplier shall provide to Buyer an itemized list of all such expenses with supporting documentation. In such event, Buyer also agrees to excuse the delay and accept Suppliers performance at any appropriately deferred completion date. 5.INSPECTIONS AND TESTING 5.1All the Products shall be inspected by Buyer within days after delivery thereof. Buyer reserves the right, by giving notice to Supplier not later than days

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