Supply Agreement

Supply Agreement

03 November 2010

The supply agreement that is made between two parties is like the old fashioned handshake of centuries long past. This is reminiscent of when two men would make an agreement and seal it with a hand shake.

Today, because of the way business is conducted on the phone instead of in person, a supply agreement can be made over the phone or with an email. What needs to be understood is that an agreement is not a legally binding document like a contract is. This is generally just a verbal agreement that relies on the honor of the two parties involved.

Most of the time, a supply agreement is made between two parties that have already established a working relationship of some type. This is made possible because of a history of payment and delivery has already been made. This can occur after the first supply contract is fulfilled or the 100th. It all depends on the two parties involved.

A supply contract differs from a supply agreement by being in a formal document that is legally binding in the courts. If one party does not fulfill the contract, they become legally obligated to monetarily compensate the other party. This is why this type of document is carefully reviewed by both parties before it is signed by the authorizing personnel.

The supply agreement is not legally binding and if a party does not fulfill their part of the bargain, there is no legal recourse that can be taken by the other party. For this reason, most companies avoid this type of arrangement with unknown companies.

The reason a supply agreement might be preferred by some is the speed at which a transaction can be reached. Without the formal drawing up of a contract, the reviewing of the document, then the signing of the document, time can be saved. In this case, speed can lead it to a delay if the agreement is broken, and a delay in your project could occur.