Last edited 11 Jul 2019

Supply contract

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:

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.

Specialist contracts (NEC)

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.

The NEC4 Supply Short Contract can be used for local and international procurement of goods on less complex projects that do not require sophisticated management techniques.

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