What is a supplier agreement?

A supplier agreement is a contract between a farmer or food producer and a major buyer that defines the terms of the purchase of the producer’s goods. Supplier agreements are also used between producers of ingredients and the processors that incorporate those ingredients into processed products.

What do we do for Buyers?

If you are a distributor, retailer, wholesaler, online sales platform, or food processor, you can use a supplier agreement to shift some risk onto your suppliers for the harm their products cause to your customers. This is how you build legal resiliency into your supply chain. In addition to the terms that would also appear in a commercial agreement, a good supplier agreement between food businesses should address the following topics:

  1. Indemnification for harm caused by the supplier’s goods.
  2. Allocation for recall related expenses.
  3. Responsibility for conducting product recalls.
  4. Warranties that suppliers have complied with Good Manufacturing Practices, Good Agricultural Practices, and any other written food safety guidance that may be promulgated by the buyer.
  5. A description of the goods being bought and sold, so that buyers have the ability to reject nonconforming goods.
  6. Warranties that products or ingredients have been properly labeled according to FDA, USDA, and TTB regulations, particularly for the eight major allergens covered in the Food Allergen Labeling and Consumer Protection Act.
  7. Buyer’s right to audit and inspect the supplier’s facility to ensure that the supplier operates in conformity with food safety requirements.
  8. Additional payment terms that are unique to the food industry by operation of law,  such as those imposed by the Perishable Agricultural Commodities Act or the Packers and Stockyard Act.

We’ve drafted supplier agreements for online sales platforms, regional retailers, food hubs, and food processors. The terms of our supplier agreements change based on the role that each client plays in the food system.

What do we do for Suppliers?

If you are a food product manufacturer, a farmer, or an ingredient manufacturer and you’ve sold your product to a big retailer or distributor, you have definitely signed a supplier agreement. If you have signed a supplier agreement, you have probably assumed a slew of potentially huge liabilities.  For small to mid-sized suppliers that lack the bargaining power to negotiate more favorable terms, major buyers offer a “take it or leave it” supplier agreement. We can perform a desk audit of a supplier agreement to identify the major liabilities, then recommend a mitigation strategy that is personalized for the Supplier’s business.

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