The following Commercial guidance note Produced in partnership with Paul de Vince and Jagdeep Singh of Gateley Plc provides comprehensive and up to date legal information covering:
This Practice Note is prepared to assist with the review and/or negotiation of a drop ship agreement. See Precedents: Drop ship agreement—pro-customer (merchant) and Drop ship agreement—pro-supplier.
Drop shipping is a term that is often applied loosely to cover a variety of supply chain models and theoretically can arise at various different points in the supply chain eg manufacturer to distributor, distributor to merchant or manufacturer to merchant. However in its most typical form, it is an arrangement which allows a merchant to operate free from stock holding constraints by leaving the physical stock holding and supply arrangements to be managed by a third party, usually the manufacturer of the goods.
Furthermore, while drop shipping has been around since the relatively early days of e-commerce it is, still, in many respects evolving as a supply chain model.
The significance of this for you, when faced with negotiating a contract for one of these arrangements, is that unlike some more settled models, it would be inaccurate to say on many of the likely negotiation points that there is an ‘established market position’ as regards the allocation of risk/responsibility.
You should approach drafting the contract with a relatively free-hand without so much pressure of ‘how it is normally done’ to capture your client’s commercial interests in the contract that you are negotiating.
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