Consignment stock agreement—pro-supplier
Produced in partnership with Paul de Vince and Jagdeep Singh of Gateley Plc
Consignment stock agreement—pro-supplier

The following Commercial precedent produced in partnership with Paul de Vince and Jagdeep Singh of Gateley Plc provides comprehensive and up to date legal information covering:

  • Consignment stock agreement—pro-supplier
  • Background
  • 1 Definitions and interpretation
  • 2 Supply of goods
  • 3 Exclusivity
  • 4 Order commitment
  • 5 Forecasts
  • 6 Orders
  • 7 Delivery
  • 8 Consignment
  • More...

This Agreement is made on [date]

Parties

  1. 1

    [insert name of supplier] [of OR a company incorporated in [England and Wales] under number [insert registered number] whose registered office is at] [insert address] (Supplier); and

  1. 2

    [insert name of customer] [of OR a company incorporated in [England and Wales] under number [insert registered number] whose registered office is at] [insert address] (Customer)

(each of the Supplier and the Customer being a party and together the Supplier and the Customer are the parties).

Background

    1. (A)

      The Supplier conducts the business of supplying [insert description] to other businesses.

    1. (B)

      The Customer conducts the business of [insert description].

    1. (C)

      The parties have agreed that the Supplier will supply goods to the Customer on the terms set out in this Agreement.

    1. (D)

      To improve the efficiency of the Customer's supply chain the parties contemplate that the Supplier shall supply Goods to the Customer on a consignment stock basis and to allow the Customer to hold a consignment of the Goods on the Customer's premises.

The parties agree:

    1. 1

      Definitions and interpretation

      1. 1.1

        In this Agreement:

        [Actual Spend

        1. has the meaning given in clause 4.2;]

        Affiliate

        1. means any entity that directly or indirectly Controls, is controlled by, or is under common Control with, another entity;

        Bribery Laws

        1. means the Bribery Act 2010 [and associated guidance published by the Secretary of State for Justice under the Bribery Act 2010] [and all

other applicable UK legislation, statutory instruments and regulations in relation to bribery or corruption] [and any similar or equivalent legislation in any other relevant jurisdiction including [specify]]
  1. ;

Business Day

  1. means a day other than a Saturday, Sunday or bank or public holiday in England;

Commencement Date

  1. means [the date of this Agreement OR [insert date]];

Confidential Information

  1. has the meaning given in clause 21;

Consignment Stock

  1. has the meaning given in clause 8.1;

Contract Year

  1. means each consecutive period of 12 months commencing from the Commencement Date;

Control

  1. means [the beneficial ownership of more than 50% of the issued share capital of a company or the legal power to direct or cause the direction of the management of the company and Controls and Controlled shall be interpreted accordingly OR has the meaning given in the Corporation Tax Act 2010, s 1124 and Controls and Controlled shall be interpreted accordingly];

[Customer Premises

  1. [means the Customer’s premises as specified in Schedule 4];]

Delivery

  1. means the time at which Goods are deemed to be delivered to the Customer under clause 7.2;

Delivery Location

  1. means the location specified in an Order to which the Supplier shall deliver, or procure the delivery of, Goods;

Force Majeure

  1. [means any of the following events: [specify, eg war, the threat of war, revolution, terrorism, riot or civil commotion, or precautions against any such; strikes, lock outs or other industrial action, whether of the affected party's own employees or others; blockage or embargo; acts of or restrictions imposed by government or public authority; failures of supply of water, power, fuels, transport, equipment or other deliverables or services; explosion, fire, corrosion, ionising radiation, radioactive contamination; flood, natural disaster, or adverse weather conditions; malicious or negligent act or accident, and breakdown or failure of equipment, whether of the affected party or others,] but does not include, without limitation, specify, eg inability to pay, mechanical difficulties, shortage or increase of price of raw materials, over-commitment or market or other circumstances which may make the terms of this Agreement unattractive to [specify party];

    OR

    means an event or sequence of events beyond a party’s reasonable control preventing or delaying it from performing its obligations under this Agreement save that an inability to pay is not a Force Majeure event;]

Forecast

  1. has the meaning given in clause 5.1.1;

Goods

  1. means, as the context permits: (i) the goods listed in Schedule 1, or (ii) the goods supplied to the Customer by the Supplier pursuant to an Order;

Intellectual Property Rights

  1. means copyright, patents, rights in inventions, rights in confidential information, Know-how, trade secrets, trade marks, service marks, trade names, design rights, rights in get-up, database rights, rights in data, semi-conductor chip topography rights, mask works, utility models, domain names, rights in computer software and all similar rights of whatever nature and, in each case: (i) whether registered or not, (ii) including any applications to protect or register such rights, (iii) including all renewals and extensions of such rights or applications, (iv) whether vested, contingent or future and (v) wherever existing;

IPR Claim

  1. has the meaning given in clause 19.1;

Know-how

  1. means inventions, discoveries, improvements, processes, formulae, techniques, specifications, technical information, methods, tests, reports, component lists, manuals, instructions, drawings and information relating to customers and suppliers (whether written or in any other form and whether confidential or not);

MSA Offence

  1. has the meaning given in clause 23.1.1;

Order

  1. has the meaning given in clause 6.1;

[Order Commitment

  1. has the meaning given in clause 4.1;]

Price

  1. means the price of any of the Goods determined in accordance with clause 13 and Prices shall be interpreted accordingly;

Representatives

  1. has the meaning given in clause 21.2.1;

Requisition

  1. means the Customer taking Goods from the Consignment Stock or immediately on Delivery for [use OR resale] as contemplated by clause 9 and Requisitioned shall be interpreted accordingly;

Requisition Notice

  1. has the meaning given in clause 9.2;

Specification

  1. means the description of the Goods set out in Schedule 1;

Storage Facilities

  1. means the storage facilities at the Customer Premises which are to be used to store the Goods as specified in Schedule 4;

Term

  1. has the meaning given in clause 2.1;

VAT

  1. means value added tax, as defined by the Value Added Tax Act 1994; and

Warranty Period

    1. has the meaning given in clause 10.1.

  1. 1.2

    In this Agreement:

    1. 1.2.1

      a reference to this Agreement includes its schedules, appendices and annexes (if any);

    1. 1.2.2

      a reference to a ‘party’ includes that party’s personal representatives, successors and permitted assigns;

    1. 1.2.3

      a reference to a ‘person’ includes a natural person, corporate or unincorporated body (in each case whether or not having separate legal personality) and that person’s personal representatives, successors and permitted assigns;

    1. 1.2.4

      a reference to a gender includes each other gender;

    1. 1.2.5

      words in the singular include the plural and vice versa;

    1. 1.2.6

      any words that follow 'include', 'includes', 'including', ‘in particular’ or any similar words and expressions shall be construed as illustrative only and shall not limit the sense of any word, phrase, term, definition or description preceding those words;

    1. 1.2.7

      the table of contents, background section and any clause, schedule or other headings in this Agreement are included for convenience only and shall have no effect on the interpretation of this Agreement; and

    1. 1.2.8

      a reference to legislation is a reference to that legislation as [in force as at the date of this Agreement OR amended, extended, re-enacted or consolidated from time to time [except to the extent that any such amendment, extension or re-enactment would increase or alter the liability of a party under this Agreement]]

      1. .

  1. 2

    Supply of goods

    1. 2.1

      This Agreement commences on the Commencement Date and shall continue until [date], when it shall terminate automatically unless terminated earlier in accordance with clause 20 (the Term).

    1. 2.2

      During the Term, the Supplier agrees to supply, and the Customer agrees to purchase, Goods on a consignment stock basis and on the terms set out in this Agreement. The procedure for ordering Goods is set out in clause 6.

  1. 3

    [Exclusivity

    1. 3.1

      The Supplier shall be the exclusive supplier to the Customer of the [Goods OR list category or description of goods]. The Customer shall not purchase, directly or indirectly, any [Goods OR any goods of the type described in this clause 3.1] from any other person during the Term.

    1. 3.2

      Nothing in this Agreement shall restrict the Supplier from supplying Goods (or any other products) to other customers.]

  1. 4

    [Order commitment

    1. 4.1

      In respect of each Contract Year during the Term, the Customer agrees to Requisition Goods with an aggregate Price of not less than [insert amount] subject to adjustment in accordance with the provisions of clauses 4.4 and 4.5 (the Order Commitment).

    1. 4.2

      In the event that the total Price of Goods purchased by the Customer in respect of any Contract Year during the Term (the Actual Spend) is less than the Order Commitment in force for that Contract Year, the Supplier may:

      1. 4.2.1

        require the Customer to pay the difference between the Order Commitment and the Actual Spend in accordance with the provisions of clause 14 (payment); and/or

      1. 4.2.2

        terminate this agreement in accordance with clause 20.2.1 (irremediable material breach).

    1. 4.3

      The provisions of clause 4.2 shall not apply to the extent that the Customer does not meet the Order Commitment as a direct result of:

      1. 4.3.1

        the Supplier failing or choosing not to supply the Customer with any Goods ordered in accordance with the provisions of this Agreement;

      1. 4.3.2

        the Supplier’s breach of contract; or

      1. 4.3.3

        a Force Majeure event.

    1. 4.4

      No later than one month before the end of each Contract Year, the parties shall meet to review the Order Commitment for the year to date and use all reasonable endeavours to agree the value of the Order Commitment for the next Contract Year.

    1. 4.5

      If the parties are unable to reach an agreement pursuant to clause 4.4, the Order Commitment shall be increased in proportion to any increase in Prices imposed pursuant to clause 13.4 or 13.5, [with effect from the next Contract Year].]

  1. 5

    Forecasts

    1. 5.1

      The Customer shall notify the Supplier in writing of:

      1. 5.1.1

        the Customer’s reasonable estimate of its monthly requirements for Goods in each Contract Year (Forecast) not later than [four] weeks before the start of that Contract Year; and

      1. 5.1.2

        any anticipated revisions to that estimate as soon as reasonably practicable.

    1. 5.2

      The Forecast shall not be binding on the Customer and it does not constitute an obligation to purchase Goods.

  1. 6

    Orders

    1. 6.1

      The Customer may [at any time OR [specify order window]] provide the Supplier with a written order for Goods substantially in the form set out in Schedule 3 or in any other form that the parties may agree from time to time [(and includes a request for replacement Goods in a Requisition Notice in accordance with clause 9.3.3)] (an order).

    1. 6.2

      The Supplier may accept or reject an Order at its discretion. An Order shall not be accepted, and no binding obligation to supply any Goods shall arise, until the earlier of:

      1. 6.2.1

        the Supplier’s written acceptance of the Order; or

      1. 6.2.2

        the Supplier dispatching the Goods or notifying the Customer that they are available for collection (as the case may be).

    1. 6.3

      Rejection by the Supplier of an Order, including any communication that may accompany such rejection, shall not constitute a counter-offer capable of acceptance by the Customer.

    1. 6.4

      Any terms and conditions of the Customer included or referred to in the Order, or any proposed variation to this Agreement set out in the Order, shall not be binding on the Supplier.

    1. 6.5

      The Supplier may issue quotations to the Customer from time to time. Quotations are invitations to treat only. They are not an offer to supply Goods and are incapable of being accepted by the Customer.

    1. 6.6

      Marketing and other promotional material relating to the Goods are illustrative only and do not form part of this Agreement. The Customer agrees that, in submitting an Order, it has not relied on any representations or statements by the Supplier other than those expressly set out in this Agreement.

  1. 7

    Delivery

    1. 7.1

      Each Order shall specify whether the Goods are to be:

      1. 7.1.1

        delivered by the Supplier, or by a carrier appointed by the Supplier, to the Delivery Location on the date(s) specified in the Order; or

      1. 7.1.2

        made available for collection by the Customer at the Supplier's, or carrier's, premises set out in the Order (as the case may be). The Customer shall collect the Goods within the period specified in the Order.

    1. 7.2

      The Goods shall be deemed delivered:

      1. 7.2.1

        if delivered by the Supplier under clause 7.1.1, on [arrival OR completion of unloading] of the Goods at the Delivery Location; or

      1. 7.2.2

        if delivered by a carrier under clause 7.1.1, on delivery of the Goods by the Supplier to the carrier; or

      1. 7.2.3

        if collected by the Customer under clause 7.1.2, when the Supplier makes the Goods available for collection at the Supplier's, or carrier's, premises (as the case may be).

    1. 7.3

      The Customer shall not be entitled to reject any delivery of Goods on the basis that an incorrect volume of Goods has been supplied provided the volumes are within the tolerances (if any) set out in the Order.

    1. 7.4

      The Goods may be delivered by instalments [if specified in the Order]. Any delay in delivery or defect in an instalment shall not entitle the Customer to cancel any other instalment.

    1. 7.5

      Delivery of the Goods shall be accompanied by a delivery note stating:

      1. 7.5.1

        the date of the Order;

      1. 7.5.2

        the product numbers, type and quantity of Goods in the consignment; and

      1. 7.5.3

        any special handling instructions.

    1. 7.6

      Time of delivery is not of the essence. The Supplier shall use its reasonable endeavours to meet delivery dates but such dates are approximate only.

    1. 7.7

      Unless the parties agree otherwise, packaging material is to be promptly returned to the Supplier at the [Supplier’s OR Customer’s expense].

    1. 7.8

      The Supplier shall not be liable for any delay in or failure of delivery caused by:

      1. 7.8.1

        the Customer's failure to: (i) make the Delivery Location available, (ii) prepare the Delivery Location [in accordance with the Supplier's instructions OR as required for delivery] [and installation of the Goods] or (iii) provide the Supplier with adequate instructions for delivery [and installation] [or otherwise relating to the Goods];

      1. 7.8.2

        the Customer's failure to collect the Goods from the Supplier's premises; or

      1. 7.8.3

        an event of Force Majeure.

    1. 7.9

      If the Customer fails to accept delivery of the Goods the Supplier shall store and insure the Goods pending delivery, and the Customer shall pay [reasonable storage and insurance charges OR storage and insurance charges at the Supplier's then-applicable rate OR all costs and expenses incurred by the Supplier in doing so].

    1. 7.10

      If [specify number] Business Days following [the due date for delivery or collection OR the last day of the period for delivery or collection] of the Goods, the Customer has not taken delivery of or collected them, the Supplier may resell or otherwise dispose of the Goods. The Supplier shall:

      1. 7.10.1

        deduct[ [reasonable storage charges and costs of resale] [storage charges at the Supplier's then-applicable rate and reasonable costs of resale]]; and

      1. 7.10.2

        account to the Customer for any excess of the resale price over, or invoice the Customer for any shortfall of the resale price below, the Price paid by the Customer for the Goods.

  1. 8

    Consignment

    1. 8.1

      The Supplier shall allow the Customer to take into stock an amount of Goods delivered to be held on consignment (Consignment Stock) and which shall remain the Supplier’s property (in accordance with clause 12) pending their Requisition.

    1. 8.2

      [The Customer shall not at any time hold more Consignment Stock than the limit detailed in Schedule 4.]

    1. 8.3

      Pending their Requisition, the Customer shall keep the Consignment Stock in the Storage Facilities and may not store them in or move them to any other location except as permitted under clause 9 or as otherwise agreed with the Supplier in writing. Save for any Goods which the Customer wishes to Requisition immediately, it shall promptly transport Goods to the Storage Facilities following Delivery.

    1. 8.4

      On a [describe time period] and at any time on request the Customer shall provide the Supplier with details of all Goods held by it in the Consignment Stock, their location and their date of Delivery.

    1. 8.5

      The Customer shall give the Supplier [advance] notice of its intention to Requisition any Goods before they are placed into the Consignment Stock through the issue of a Requisition Notice in respect of the Goods concerned in accordance with clause 9.2 and 9.3.

    1. 8.6

      The Customer shall (at its own cost) ensure that the Storage Facilities:

      1. 8.6.1

        are watertight, clean, safe and secure;

      1. 8.6.2

        [meet the standards and comply with the requirements set out in Schedule 4;]

      1. 8.6.3

        are subject to regular inspections;

      1. 8.6.4

        generally provide optimal conditions for the storage of the Goods and keep to a minimum instances of stock loss;

      1. 8.6.5

        are only used to store the Goods and not used for any other purpose;

      1. 8.6.6

        are free from all forms of animal or insect infestation and clean and tidy having regard to the nature of the Goods; and

      1. 8.6.7

        are subject to a regular scheduled cleaning, repair and maintenance programme aimed at maintaining or improving their cleanliness, fitness for purpose condition.

    1. 8.7

      The Supplier shall ensure that at all times and without the need for advance notice that the Customer and its nominees have access to and use of the Storage Facilities and all associated equipment and areas in order to examine the Goods, and the conditions in which they are being stored and if required to remove them.

    1. 8.8

      The Supplier shall provide all reasonable assistance to the Customer in the exercise by it of its rights under clause 8.7 and shall do all such things as may be reasonably necessary to deliver up the Goods to the Customer or its nominees, if the Customer requires.

  1. 9

    Requisitioning goods

    1. 9.1

      The Customer may only Requisition Goods in accordance with clause 8.5 or this clause 9.

    1. 9.2

      By [time] on each [day] the Customer shall send to the Supplier a notice (Requisition Notice) specifying the amount of Consignment Stock which it intends to Requisition [that day]. The Customer may not remove Goods from the Consignment Stock unless it has first notified the Supplier of its intention to do so in a Requisition Notice.

    1. 9.3

      Each Requisition Notice shall include the following information:

      1. 9.3.1

        details of the specific Goods which the Customer intends to Requisition;

      1. 9.3.2

        the [times OR dates] when they will be Requisitioned;

      1. 9.3.3

        whether the Customer requires the Goods concerned to be replaced (a requirement for a replacement constituting an Order); and

      1. 9.3.4

        [add details of any other required content].

    1. 9.4

      [The Customer may not in any [add details of period, eg day] Requisition more Goods than the [add details of period, eg daily] limit set out in Schedule 4 and shall only Requisition Goods in units and multiples of [add details if relevant, eg X tonnes; Y SKUs].]

    1. 9.5

      A Requisition Notice issued by the Supplier constitutes an irrevocable offer from the Customer to buy the specified Goods on the terms of this Agreement.

    1. 9.6

      The Supplier may refuse to accept an offer from the Customer under clause 9.5 but may only do so within [period] of receiving notice of the offer otherwise it shall be deemed to have been accepted.

    1. 9.7

      [The Customer shall ensure that Goods are Requisitioned within [period] of their date of Delivery.]

  1. 10

    Warranty

    1. 10.1

      The Supplier warrants that the Goods shall, for a period of [three] months from Delivery (the Warranty Period):

      1. 10.1.1

        conform in all material respects to the Order and Specification;

      1. 10.1.2

        be free from material defects in design, material and workmanship; and

      1. 10.1.3

        [be of satisfactory quality within the meaning of the Sale of Goods Act 1979].

    1. 10.2

      The Supplier shall, at its option, repair, replace, or refund the Price of, any Goods that do not comply with clause 10.1, provided that the Customer:

      1. 10.2.1

        serves a written notice on Supplier:

        1. (a)

          during the Warranty Period in the case of defects discoverable by a physical inspection; or

        1. (b)

          in the case of latent defects, within [one] month from the date on which Customer became aware (or should reasonably have become aware) of the defect;

      1. 10.2.2

        provides the Supplier with sufficient information as to the nature and extent of the defects and the uses to which the Goods had been put prior to the defect arising;

      1. 10.2.3

        gives the Supplier a reasonable opportunity to examine the defective Goods; and

      1. 10.2.4

        returns the defective Goods to the Supplier at the [Supplier’s OR Customer's] expense.

    1. 10.3

      The provisions of this Agreement, including the warranties set out in clause 10.1, shall apply to any Goods that are repaired or replaced with effect from Delivery of the repaired or replaced Goods.

    1. 10.4

      The Supplier shall not be liable for any failure of the Goods to comply with clause 10.1:

      1. 10.4.1

        where such failure arises by reason of wear and tear, wilful damage, negligence[, or could be expected to arise in the normal course of use of the Goods];

      1. 10.4.2

        to the extent caused by the Customer's failure to comply with the Supplier's instructions in relation to the Goods, including any instructions on installation, operation, storage or maintenance;

      1. 10.4.3

        to the extent caused by the Supplier following any specification or requirement of the Customer in relation to the Goods;

      1. 10.4.4

        where the Customer modifies any Goods without the Supplier's prior [written] consent or, having received such consent, not in accordance with the Supplier’s instructions; or

      1. 10.4.5

        where the Customer uses any of the Goods after notifying the Supplier that it does not comply with clause 10.1.

    1. 10.5

      Except as set out in this clause 10:

      1. 10.5.1

        the Supplier gives no warranty and makes no representations in relation to the Goods; and

      1. 10.5.2

        shall have no liability for their failure to comply with the warranty in clause 10.1,

      and all warranties and conditions (including the conditions implied by sections 13–15 of the Sale of Goods Act 1979), whether express or implied by statute, common law or otherwise are excluded to the extent permitted.

  1. 11

    Risk

    Risk in Goods shall pass to the Customer on Delivery.

  1. 12

    Title

    1. 12.1

      An agreement to sell Goods that are in the Consignment Stock (within the meaning of s 2(5) of the Sale of Goods Act 1979) shall not arise until they are Requisitioned.

    1. 12.2

      Title to the Goods shall pass to the Customer once the Supplier has received payment in full and cleared funds for the Goods.

    1. 12.3

      Until title to the Goods has passed to the Customer, the Customer shall:

      1. 12.3.1

        hold the Goods as bailee for the Supplier;

      1. 12.3.2

        store the Goods separately from all other material in the Customer's possession;

      1. 12.3.3

        take all reasonable care of the Goods and keep them in the condition in which they were delivered;

      1. 12.3.4

        insure the Goods from the date of Delivery: (i) with a reputable insurer (ii) against all risks (iii) for an amount at least equal to their Price (iv) noting the Supplier's interest on the policy;

      1. 12.3.5

        ensure that the Goods are clearly identifiable as belonging to the Supplier;

      1. 12.3.6

        not remove or alter any mark on or packaging of the Goods;

      1. 12.3.7

        inform the Supplier immediately if it becomes subject to any of the events or circumstances set out in clauses 20.2.1 to 20.2.3 or 20.4.1 to 20.4.14; and

      1. 12.3.8

        on reasonable notice permit the Supplier to inspect the Goods during the Customer’s normal business hours and provide the Supplier with such information concerning the Goods as the Supplier may request from time to time.

    1. 12.4

      [Notwithstanding clause 12.3, the Customer may use or resell the Goods in the ordinary course of its business until such time as it becomes aware or ought reasonably to have become aware that an event specified in clauses [20.2.1 to 20.2.3 or 20.4.1 to 20.4.14] has occurred or is likely to occur].

    1. 12.5

      If the Customer resells the Goods in accordance with clause 12.4, title to the Goods shall pass to the Customer immediately prior to the resale.

    1. 12.6

      If, at any time before title to the Goods has passed to the Customer, the Customer informs the Supplier, or the Supplier reasonably believes, that the Customer has or is likely to become subject to any of the events specified in clauses [20.2.1 to 20.2.3 or 20.4.1 to 20.4.14], the Supplier may:

      1. 12.6.1

        require the Customer [at the Customer's expense] to re-deliver the Goods to the Supplier; and

      1. 12.6.2

        if the Customer fails to do so promptly, enter any premises where the Goods are stored and repossess them.

  1. 13

    Price

    1. 13.1

      The Prices payable by the Customer in respect of any Order for Goods are contained in Schedule 2 and may be increased by the Supplier in accordance with clauses 13.4 and 13.5.

    1. 13.2

      The Prices are exclusive of:

      1. 13.2.1

        [packaging, delivery, and insurance] which shall be charged in addition at the Supplier’s standard rates, and

      1. 13.2.2

        VAT (or equivalent sales tax).

    1. 13.3

      The Customer shall pay any applicable VAT (or equivalent sales tax) to the Supplier on receipt of a valid VAT invoice.

    1. 13.4

      The Supplier may increase the Prices at any time by giving the Customer not less than 15 Business Days’ notice in writing provided that:

      1. 13.4.1

        the number of Price increases per Contract Year does not exceed [two] (excluding any increases imposed in accordance with clause 13.5); and

      1. 13.4.2

        the increase does not exceed [insert percentage] of the Prices in effect immediately prior to the increase.

    1. 13.5

      1. Notwithstanding clause 13.4, the Supplier may increase the Prices with immediate effect by written notice to the Customer where there is an increase in the direct cost to the Supplier of supplying the relevant Goods which exceeds [

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