Manufacturing Agreement

This Packet Includes:

1. Description and Instructions

2. Manufacturing Agreement

Description and Instructions

Manufacturing Agreement

A manufacturing agreement grants the manufacturer a non-exclusive right to manufacture and package a customer's products. Manufacturing agreements generally include provisions wherein the customer grants the non exclusive right to use customers trademarks, tradenames and such identification marks on the product packages. Generally, the customer has the right to purchase any improvements or developments made by the manufacturer.

Some noteworthy points are:

1. The agreement should clearly mention who would be responsible for any technology transfer, the costs associated with them, and how parties would go to protect such confidential information.

2. The agreement should clearly mention if the manufacturer can produce products which are similar to the customer’s competitor’s products. If such a restriction is imposed, the agreement should limit it to a few years making it a reasonable limit.

3. Should there be any changes to specifications or manufacturing process, the agreement should address how the cost associated with the changes or the profits lost for the goods already produced, be taken care of.

4. Parties should make sure that each of them has the necessary licences, approvals and contracts which would enable them to manufacture the product in question.

5. Typically, the product is non-conforming if it does not conform to the agreed-upon specifications. The parties should also consider other measures of conformity. For example, in order for a product to be “conforming,” it should be manufactured in compliance with some specific quality standards released by authorise d bodies. The agreement should clearly mention the time within which such non conformity should be reported to the manufacturer. The agreement should always mention a reasonable time within which customer should report such discoveries of non conformity.

6. Regardless of where the parties come out on the issue of rejection of product, typically the parties agree that the manufacturer is responsible for the cost of the recall, as long as the recall was caused by nonconforming product. However, the agreement should expressly state this. In some situations, however, the manufacturer may have the business leverage to disclaim responsibility if the client did not reject the product within the applicable rejection window.

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