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Goods and Services Agreement
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What is a goods and services agreement?
A goods and services agreement is a contract used when a party agrees to supply goods or services to another party. It outlines the terms that must be followed by both parties in performing their obligations. For example, if a client buys goods from a supplier, the goods and services agreement must specify the goods purchased, the price to be paid, the terms of payment, the date and place of delivery, and other terms of the contract.
A Specifications document may be attached to the goods and services agreement to provide more details about the goods or services to be provided by the supplier. It can be used by the client to describe the goods or services he is expecting. By adding the Specifications to the agreement, it lessens the risk of having miscommunications and misunderstandings about the goods or services.
What are the key clauses in a goods and services agreement?
A complete goods and services agreement should include the following clauses:
- Parties – Who is the supplier and who is the client?
- Goods or Services – The agreement must accurately describe the goods or services to be provided.
- Price – How much should the client pay for the goods or services?
- Payment Terms – When should the price be paid? Will the client pay a lump-sum payment or will they pay on installment?
- Placement of Orders – How should orders be made? For the supply of goods, the purchase order document usually states the number of goods to be provided.
- Acceptance of Orders – What is the process by which the client accepts the goods or services?
- Location – Where should services be provided?
- Delivery – When and where should delivery be made?
- Duration – How long should the goods or services be provided? Generally this relates to services and describes the length of time that the services must be provided for.
- Transfer of Risk and Title – When will the risk in the goods and the title to the goods be transferred to the client? Usually risk in the goods passes to the client as soon as the goods are received by the client. Most agreements are structured such that title in these goods passes on payment in full for the goods.
- Conditions – The parties may add any other terms and conditions that will determine the rights and obligations of the parties under the agreement.
- Exclusivity – Sometimes these agreement have an exclusivity clause which sets out that the supplier has the exclusive right to supply the goods and services to the client.
- Failure to Pay – What are the consequences if the client fails to pay the price of the goods or services?
- Subcontractors – Can the supplier hire subcontractors to help provide the agreed services to the client, or does the supplier need the client’s consent, or it is forbidden under the terms of the contract?
- Intellectual Property – Who owns the intellectual property rights in anything created by the supplier in the course of providing services to the client?
- Confidentiality – Are there any confidentiality obligations requiring both the client and the supplier to keep confidential any information they come across in the fulfillment of their respective obligations.
- Warranties – What are the warranties of the parties in the performance of their obligations?
- Insurance – The parties may agree that one of them will take out an insurance pending the fulfillment of the supplier’s obligations.
- Limitation of Liability – The parties may look to limit the amount that will be paid out should any liability arise under or in connection with the agreement. They may also agree that they are exempt from any liability for indirect or consequential damages.
- Indemnity – The agreement may also include an indemnity provision which would usually specify that the supplier indemnifies the client for any loss or damages that the supplier causes the client in the process of providing the goods and services.
- Termination – How can the goods and services agreement be terminated? What are the causes that will allow a party to terminate the agreement? What are the consequences of terminating the agreement?
- Force Majeure – In this day and age its important to have a force majeure clause in the contract. What will happen if a party is prevented from fulfilling his obligations by circumstances beyond his control?
- Disputes – How can disputes be resolved? The contract should specify this.
What happens if I don’t put in place a goods and services agreement?
A goods and services agreement serves as proof of the agreement of the parties. A simple mistake about the terms of the contract can cause substantial damage and losses. For example, if a client buys goods for an event (e.g. catered food for an engagement party ), a mistake on the date of delivery could render the goods useless.
Having a goods and services agreement helps prevent simple misunderstandings and miscommunications. It also helps settle disputes and prove the obligations of the parties. Without a goods and services agreement, a party may deny an obligation that he should have been responsible for.
See related reading: Dry Hire vs Wet Hire Agreements
Do you have questions about how to write a goods and services agreement? Email the Contract Company and let us know how we can help.
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