PINE

Long term Supplier Agreement

Any supplier that wants a regular arrangement for the sale of a particular product or range
of products can benefit from our Long Term Supply Agreement template.

What is this Agreement for?

It is designed to enable suppliers & PINE to operate through an agreement with
predetermined commission attributable to PINE after every sale with all sales being made
against proper documentation like cash memo. It is MANDATORY for suppliers to reveal
their inventory information to ensure product availability.

What are the main issues?

The agreement terms will cover:

● Duration: probably an initial period which can be renewed by agreement.*

● The products to be covered will be set out in a schedule and there will be agreed
quality standards
● Enlistment procedure: the products that will be shown in the website needs to be
specified in reasonable detail with minimum and/or maximum quantities per
order.
● Pricing will depend on the supplier but the supplier must keep in mind that similar
product will be sold in the same platform. Hence, they must adjust prices keeping
customer demand in mind & the competition. (The issue of discount by PINE will
be revealed to suppliers. PINE will give confirmation that no specific supplier will
get extra benefit in terms of discount & offers. These discount & offers will be
eligible to all vendors equally.)
● Defective products and how to deal with these, including any third-party claims,
needs to be specified.(THIS IS A MUST)
● Guarantee of Benefit: PINE’s platform will ensure total coverage and marketing of
your products to potential Target Group via online mean. Your enlistment will double
your sales due to exposure in the market which is now not possible due to various
limitations on your part.
● Commission Payment to PINE: Enlistment in PINE’s platform will require to pay
commission of 15% on a per sale basis after every sale of product. The commission
money will be collected by PINE from the customer after every sales and the residual
amount will be handed back to vendor at the end of the day.
● Each party to have the right to terminate in certain circumstances
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What clauses does the Agreement contain?
The clauses cover:

1. Duration
2. quality of products
3. quantities
4. Price
5. Product Discounts agreements-optional
6. Enlistment procedures
7. Delivery & logistics----Tazman
8. Risk (defects & unavailability)
9. Ownership
10. Guarantee of Benefit
11. Commission Payment to PINE----liquidity crunch for suppliers & getting product out
from vendor.
12. Termination

Documents from Supplier:

 Name of vendor
 NID Copy
 Phone number & Location of shop
 Trade License*
 Any deed or legal papers related to shop/storehouse
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Explanatory Notes
Dealing with the specific clauses:

1. AGREEMENT TO SUPPLY

This establishes the basic agreement between the parties for the sale and purchase of Products which
are defined in a Schedule. Those Products can be amended by agreement.

2. DURATION

Here the Initial Period and Commencement Date are to be specified. Clause 2.2 provides for renewal at
the end of the Initial Period on a yearly basis.

3. QUALITY

The quality of Products is, in effect, defined by reference to the specification which will be in a Schedule
to the Agreement. The Purchaser must inform the Supplier if Products do not conform, in which case the
Supplier is responsible for their replacement. (See also clause 8.1 “Claims and Indemnity”). There is also
provision in 3.3 for independent routine and non-routine testing.

4. QUANTITIES AND ORDERING PROCEDURES

Here again, there will be a Minimum and Maximum Quantity contained in a Schedule – in some cases
only a Minimum or Maximum may be required.

4.2 requires the Purchaser to give regular forecasts of quantities, thereby enabling the Supplier to be in a
reasonable position to meet purchase orders.

4.3 deals with the requirements for the placing of an Order, within minimum time periods and provision for
delivery dates.

4.4 makes it clear that the Supplier is not required to deliver more than the Maximum Quantity.

Sometimes an agreement such as this will contain “take or pay” provisions. In such a case, if the
Purchaser fails to take the Minimum Quantity, he will pay for the shortfall. Similarly, if the Supplier fails to
provide the Minimum Quantity, he may be penalised. We have not catered for this here but it is worth
considering. In effect, a “take or pay” clause is similar to a liquidated damages provision. Careful drafting
and specific legal advice will be required to ensure that such a provision is not declared an unenforceable
“penalty.

5. DELIVERIES, RISK AND OWNERSHIP

This specifies where deliveries are to be made and when they are to be made. Both ownership and risk
in Product passes from the Supplier at the delivery point.
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5.2 and 5.3 set out the two ways in which ownership and risk passes.

The Supplier is responsible for packaging and the Purchaser is responsible for reimbursing the Supplier
for any storage costs which are incurred as a result of failure to take delivery.

6. PRICE OF PRODUCTS

Here the arrangements are that the prices at the commencement of the contract are shown in the
Schedule. Whether or not transportation is included in the price, as stated in 6.1, is a matter to be
determined contract by contact.

Price adjustments in a long term contract are usually going to be necessary and we have assumed in 6.2
that there may be a formula for price adjustments. This could, for example, provide for a price adjustment
each year by reference to the Retail Price Index published by the government in the Supplier’s country.
Alternatively, prices might be adjusted by reference to the Supplier’s price list or, if there is no formula,
there could be a 3 month period of negotiation and if agreement cannot be reached, the Supplier has the
right to terminate the contract (6.3).

7. PAYMENT

Here we have two alternative provisions at clause 7.1. Alternative A assumes payment on a monthly
basis against invoices. Alternative B provides for the Purchaser to open a revolving Letter of Credit which
will give the Supplier greater security, especially if Supplier and Purchaser are in difference countries.

The Supplier is entitled to claim interest on late payment under 7.3. He is also allowed to suspend
deliveries if payments are overdue for more than a specific period (7.4).

8. CLAIMS

At clause 8.1 the Purchaser agrees to advise the Supplier of any defective product liability claims and, at
the Supplier’s expense, to assist the Supplier in defeating such claims.

Clause 8.2 obliges the Purchaser to avoid making any misleading claims in respect of the Products.

While clauses 8.1 and 8.2 are appropriate where the Products are re-sold by the Purchaser, clause 8.3
deals with the situation where all or part of the Products are raw materials used by the Purchaser as part
of its manufacturing process and will therefore not be re-sold to a third party without modification.

9. TERMINATION

This allows the Supplier to terminate if the Purchaser is overdue in making payments and the Purchaser
to terminate if the Supplier commits a material breach of the Agreement. Either party can terminate in the
event of the other party’s insolvency.

10. MISCELLANEOUS
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This clause contains some short provisions restricting assignment, making it clear that this Agreement
contains all the legally binding matters between the parties and dealing with governing law and notices