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Last edited 11 Jul 2019
A contract generally establishes the terms of a working relationship between two parties. The same generally applies in a supply contract, in which the parties are on the one hand a vendor (who contracts to supply the goods) and on the other hand a customer/purchaser (who contracts to buy the goods).
The contract serves to protect the rights of both parties as they know what they can expect and what they are entitled to: the customer knows the nature of the goods they will get, the quantity and the delivery method, while the supplier knows how payment will be received.
One of the benefits of a supply contract is that, from the customer’s perspective, it may offer a discounted price for a specific period of time that might otherwise not have been available. In this way a supply contract can determine how a supplier provides goods and services to customers.
Typically, the clauses of a supply contract may stipulate:
- General terms;
- Pricing terms;
- The supplier’s main responsibilities;
- Terms of payment, e.g how to pay, whether by post, online payment, direct transfer, other method, etc;
- Terms for the delivery of goods (how they will be shipped)
- Additional charges for shipping in cases that are over and above the normal terms of the contract;
- Supplier’s delivery guarantees within a specific period following placement of order;
- Quality management;
- Compensation events e.g options for the supplier if payment terms are transgressed, including cancelling any discounts, rendering the contract null and void, etc;
- Liabilities and insurance, and
- Termination, resolving and avoiding disputes.
Pricing usually forms part of any contract and in a supply contract there may be a pricing schedule that determines the prices of the goods to be supplied to the customer. It will often identify the ‘special’ nature of the prices to the customer either as a flat rate or on a sliding scale based on the volume of goods in question. The rates so specified will usually be in force for the duration of the contract.
The above is a general description for a supply contract for which there may be numerous templates available on-line.
However, specialist goods such as those of a very high value or those of a hi-tech or delicate nature may require their own form of contract. Having standardised forms of contract can mean contract terms are homogenised over a project and across different projects giving suppliers and purchasers a familiarity which engenders confidence and can save time, money and frustration.
NEC contracts are designed to facilitate sound project management and practices as well as defining legal relationships. They can be used to procure a wide range of works as well as the purchasing of goods and supplies.
The NEC4 Supply Contract (SC), for example, is used for the local and international procurement and supply of high-value goods and associated services such as transformers, turbine rotors, rolling stock, loading bridges, transmission plant, cable and process plant, together with related services like design. It includes guidance notes and flow charts to help users get the maximum benefit out of it. The NEC4 Supply Contract (SC) is the first set of standardised terms designed for local and international procurement of high-value goods and related services including design.
 Related articles on Designing Buildings Wiki
- Construction contract conditions
- Construction law.
- Contract documents for construction
- Contractual obligation.
- Contractual right.
- Core clause.
- JCT Construction management contract
- Lump sum contract
- Modifying clauses in standard forms of construction contract
- NEC Option A: Priced contract with activity schedule
- PPC 2000
- Procurement plan.
- Procurement route
- Procurement team
- Risk allocation.
- Standard form of contract
- Tender documentation for construction projects
- Traditional contract for construction
- Traditional contract: tender
- Typical tender process for construction projects
- Variations in construction contracts
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