SUPPLY CHAIN AGREEMENT
Important legal, jurisdiction and formality warning
This fictional agreement is a worked example, not legal advice. It concerns the manufacture and supply of precision parts in England and Wales. The parties must check product safety, conformity marking, technical standards, import and export controls, customs, environmental and modern-slavery duties, health and safety, insurance, tax, insolvency risk, competition law and whether any sector regulation or customer flow-down applies. Acceptance, title and risk do not remove statutory rights that cannot lawfully be excluded. Technical drawings and quality requirements must be verified by competent engineers before production.
1. Parties, products and purpose
This agreement is made on 6 April 2026 between Alderwick Mobility Systems Limited, company number 10652841, of 70 Station Road, Coventry CV1 2GT, the Buyer, and Penrose Precision Components Limited, company number 08310472, of Unit 4 Calder Industrial Park, Wakefield WF2 0XE, the Supplier. The Buyer assembles electric mobility charging cabinets. The Supplier manufactures the anodised aluminium heat-sink assemblies identified as AP-42 and AP-43. This agreement governs recurring supply, but it does not require the Buyer to purchase a minimum quantity unless a signed Order states one.
2. Definitions and documents
Accepted Goods means Goods accepted under clause 7. Batch means Goods of the same part number and Specification revision made from the same material lot and production run and identified by the Supplier's certificate of conformity or packing list. Business Day means a day other than Saturday, Sunday or an England bank holiday. Contract Year means each period of 12 months beginning on 6 April 2026 and each successive anniversary of that date. Goods means an AP-42 or AP-43 assembly conforming to the Specification. Order means a purchase order issued under this agreement. Specification means the drawing, revision, bill of materials, quality plan and packaging instruction identified in the applicable Order. Useful Service Life means the fixed number of years stated in the applicable Specification for the relevant Goods, beginning on delivery; if the Specification states no fixed number of years, no Useful Service Life applies and the latent-defect notification period is 12 months after delivery. Forecast means the Buyer's non-binding estimate. Non-conforming Goods means Goods that do not meet the Specification, an Order, an approved sample or applicable law.
This agreement, an accepted Order, its Specification and any signed change order form the contract for the relevant Goods. If terms conflict, the order of precedence is the signed change order, this agreement, the Specification, the Order and then the Forecast. The Supplier's quotation, acknowledgement, delivery note and standard terms do not alter that order of precedence unless the Buyer signs an express variation.
3. Forecasts and orders
The Buyer will provide a rolling six-month Forecast on the first Business Day of each month. The Forecast for the first month is a firm planning signal but not an obligation; months two to six are estimates that may change. The Buyer expects a monthly requirement of 600 AP-42 units and 300 AP-43 units from July 2026, but only an accepted Order creates a quantity obligation.
An Order will state part number, drawing revision, quantity, price, required delivery date, delivery location, packaging and any applicable special test. The Supplier must accept or reject an Order within three Business Days. An Order is accepted when the Supplier confirms in writing or starts manufacture, whichever occurs first. If the Supplier identifies a capacity or material issue, it must notify the Buyer within two Business Days and propose a realistic date; it must not silently substitute a different material or revision.
The initial accepted Orders are: Order AS-2601, dated 8 April 2026, for 600 AP-42 units at £42 each, total £25,200 plus VAT, delivery on 30 June 2026; and Order AS-2602, dated 8 April 2026, for 300 AP-43 units at £58 each, total £17,400 plus VAT, delivery on 30 June 2026. The combined goods price is £42,600 plus VAT. Prices include ordinary packaging and delivery to the Buyer's Coventry site unless the Order expressly states otherwise.
4. Manufacture, quality and change control
The Supplier will manufacture using reasonable skill and care, suitable equipment, trained personnel and the materials in the Specification. It will maintain a quality-management system appropriate to the Goods, record batch and heat-treatment information, calibrate measuring equipment and retain production records for seven years. It will provide a certificate of conformity and packing list with each shipment.
The Supplier must not change the material grade, source, manufacturing process, tooling, sub-supplier, test method, site or drawing revision in a way that could affect form, fit, function, safety, durability or conformity without the Buyer's written approval. A proposed change must include reason, risk assessment, validation results, timing and affected lots. Approval does not relieve the Supplier from responsibility for conforming Goods.
The Buyer may provide tooling, gauges, drawings and confidential process information. Buyer-owned items remain the Buyer's property, must be marked where practicable, kept insured and used only for the Buyer's Orders. The Supplier must not copy, sell, charge, alter or permit a third party to use them without consent and must return them within ten Business Days after request.
5. Capacity, materials and resilience
The Supplier will reserve capacity reasonably sufficient for accepted Orders and will notify the Buyer promptly of a likely shortage. It will maintain at least four weeks of critical aluminium and fastener materials for accepted production, unless the Buyer agrees a different plan in writing. It may not subcontract manufacture of a critical part without consent, but may use approved logistics and surface-treatment subcontractors while remaining responsible for their acts.
The Supplier will maintain a business-continuity plan addressing power loss, equipment failure, cyberattack, labour disruption, fire, flood and key-sub-supplier failure. It will test the plan annually and provide a summary on request. A disruption expected to delay an Order by more than two Business Days must be notified within one Business Day, with affected lots, cause, containment, revised dates and recovery actions. The parties will cooperate on an allocation plan without creating an obligation to buy additional quantities.
6. Delivery, packaging, title and risk
Delivery is complete when the Goods are unloaded at the Buyer's named location during its receiving hours. The Supplier will give at least two Business Days' dispatch notice stating Order number, part numbers, quantities, batch numbers and estimated arrival. The Supplier will package Goods to prevent corrosion, deformation and transit damage, label each container and include the certificate of conformity. A delivery date is a contractual date, not an estimate.
Risk passes on delivery, except that risk in Non-conforming Goods passes back to the Supplier when the Buyer notifies rejection or return. Title passes on the earlier of payment for the relevant Goods or delivery, but the Supplier must not reserve title after payment. The Supplier must not charge or deal with Goods after title has passed. The Buyer may set off a good-faith claim for rejected Goods against an invoice for those Goods.
If the Supplier anticipates late delivery, the Buyer may require expedited transport at the Supplier's cost where reasonably available. For delay of more than five Business Days, the Buyer may cancel the delayed quantity and obtain a refund of any prepaid price. Repeated delay on three accepted Orders in a rolling six-month period is a material breach.
7. Inspection and acceptance
The Buyer may inspect and test Goods at the Supplier's premises, in transit where safe, or after delivery. Inspection or payment is not acceptance and does not waive a latent defect. The Buyer will use reasonable efforts to complete an initial receiving check within ten Business Days after delivery, checking quantity, visible damage, packaging, documentation and a sample of dimensions. A defect not reasonably discoverable in that check may be notified during the Goods' Useful Service Life if the applicable Specification states a fixed number of years, or within 12 months after delivery if it does not.
Goods are accepted only when the Buyer confirms acceptance in writing or when 20 Business Days have passed after delivery without a notice of visible non-conformity, whichever occurs first. This deemed acceptance does not apply to a latent defect, fraud, deliberate concealment, a safety issue or a failure that could not reasonably have been discovered. The Buyer will give the Supplier a description, batch number, photographs or test results where reasonably available and allow a reasonable investigation.
The Supplier may attend a joint inspection within five Business Days. If the parties disagree, an independent UKAS-accredited laboratory agreed within ten Business Days will test a representative sample against the Specification. The party whose position is materially wrong will pay the test cost; otherwise the cost is shared. Pending a safety decision, the Buyer may quarantine affected Goods.
8. Remedies for Non-conforming Goods
For Non-conforming Goods, the Buyer may, at its option, require prompt repair or replacement, reject and receive a refund, require a reasonable price reduction, or accept with a documented deviation. The Supplier will collect rejected Goods at its cost within five Business Days and replace them within ten Business Days or another agreed period. A repair or replacement receives a further 12-month warranty from re-delivery, without reducing other rights.
If 5 percent or more of a Batch fails, or a defect is safety-critical or repeats in two deliveries, the Supplier will conduct a root-cause investigation and give a corrective-action report within ten Business Days. The report will identify containment, affected lots, cause, prevention and verification. The Buyer may require screening or recall of affected Goods. The Supplier will reimburse reasonable direct costs of sorting, testing, return, rework, replacement, expedited transport and customer notification caused by its Non-conforming Goods.
9. Price, invoices and payment
The Supplier may invoice on delivery of conforming Goods. An invoice must state the Order, part number, quantity, unit price, VAT and bank details previously notified. The Buyer will pay undisputed amounts within 45 days of a valid invoice. The Buyer must notify a disputed amount and reason within 20 Business Days and pay the undisputed balance. The parties will resolve an invoice query within ten Business Days. The Supplier may not suspend accepted production for a genuinely disputed sum.
The prices in an accepted Order are fixed. For an Order not yet accepted, the Supplier may propose a price change only for a documented change in material cost, and the Buyer may withdraw the Order before acceptance. A change in law or VAT may be dealt with as required by law. Late payment interest is at 2 percent per year above the Bank of England base rate, subject to any mandatory statutory rule.
10. Warranties, compliance and recall
The Supplier warrants that each shipment conforms to the Specification, is new and free from material defects in design, material and workmanship, is fit for the expressly stated purpose, is made with good title and complies with applicable law and agreed standards. It will provide evidence of material origin and conformity on reasonable request. It will not use forced labour, falsify records or knowingly supply counterfeit parts.
The Supplier will notify the Buyer immediately and within 24 hours of learning of a safety defect, regulatory non-conformity, suspected counterfeit material or circumstance that may require withdrawal or recall. The parties will agree a recall plan, but the Buyer may act urgently to protect people or property. The Supplier will pay reasonable direct recall and replacement costs to the extent caused by its breach, negligence or defective Goods.
11. Intellectual property and confidentiality
The Buyer owns its drawings, specifications, tooling, data and marks. The Supplier owns its pre-existing manufacturing know-how and generic process improvements. The Supplier grants the Buyer a perpetual, worldwide, royalty-free licence to use documents and technical information supplied for the Goods to install, operate, maintain, repair and procure replacement parts. No party may use the other's information outside this agreement.
Each party will protect prices, forecasts, drawings, customer information, security information and production know-how with reasonable care, disclose them only to people who need them and are bound by confidentiality, and use them only for this agreement. Exclusions apply to information public without breach, independently developed, already known or required by law after notice where lawful. The duty lasts five years after disclosure, while trade secrets remain protected while secret.
12. Audit, insurance and indemnity
On ten Business Days' notice, the Buyer may audit the Supplier's records, quality system and relevant production areas no more than twice each year, or more often after a serious defect, regulatory event or reasonable fraud concern. The Buyer will not unreasonably disrupt production and will keep findings confidential. The Supplier will maintain public and product liability insurance of at least £5,000,000 per claim and employers' liability insurance as required by law.
The Supplier indemnifies the Buyer for reasonable direct losses, third-party claims, recall costs and property damage caused by Non-conforming Goods, bodily injury, infringement of a third party's IP by the Goods as supplied, or the Supplier's breach of applicable law. The Buyer will promptly notify a claim, allow reasonable control of defence and not settle a claim admitting the Buyer's liability without consent.
13. Liability and force majeure
Nothing limits liability for fraud, fraudulent misrepresentation, death or personal injury caused by negligence, wilful misconduct, defective products liability that cannot lawfully be limited, or unpaid prices. Subject to that, the Supplier's liability in a Contract Year is capped at the greater of £500,000 or 150 percent of the amounts paid or payable under Orders in that year; the Buyer's liability is capped at the amounts payable under affected Orders. Neither party is liable for loss of profit or indirect loss to the extent permitted by law, but this does not restrict the remedies for defective Goods, recall, confidentiality or IP infringement.
Neither party is liable for delay caused by an event beyond reasonable control, such as natural disaster, war, epidemic, governmental restriction or national grid failure, provided the event was not caused by its failure to maintain reasonable resilience. The affected party must notify the other within two Business Days, mitigate, provide weekly updates and resume performance. A force-majeure event lasting more than 30 days permits either party to cancel the affected Order without liability for future performance, but accrued rights remain.
14. Term, termination and general
This agreement begins on 6 April 2026 and continues for three years, then renews annually unless either party gives 90 days' notice. Either party may terminate for material breach not remedied within 30 days, insolvency, repeated serious quality failure, bribery, or a change of control that creates a material competitor conflict. The Buyer may cancel unstarted Orders after termination; completed accepted Orders remain payable. On termination, the Supplier returns Buyer-owned tooling and information, completes agreed transition work, and preserves records for seven years.
This agreement is the entire agreement about supply and may be varied only in a signed writing. It prevails over an inconsistent purchase order. Neither party may assign without consent except to a successor of substantially all relevant assets that assumes the obligations. No partnership, agency or employment is created. No third party may enforce it under the Contracts (Rights of Third Parties) Act 1999. Notices must be in writing and may be served by hand at, or by pre-paid first-class post to, the registered office of the recipient stated in clause 1, or by email to procurement@alderwick.example.test for the Buyer or contracts@penrose.example.test for the Supplier. A notice is deemed received if delivered by hand, when it is left at the relevant office; if sent by pre-paid first-class post, at 09:00 on the second Business Day after posting; or if sent by email, at the time of transmission when sent before 17:00 on a Business Day and otherwise at 09:00 on the next Business Day, provided the sender receives no automated failure message. If the deemed time falls outside the recipient's normal business hours, it is treated as received at 09:00 on the next Business Day. The parties will escalate disputes to Elliot Marsh and Rhea Kapoor, then mediate through CEDR in Birmingham. This agreement and non-contractual obligations are governed by the law of England and Wales and the courts of England and Wales have exclusive jurisdiction. Counterparts and electronic signatures are permitted where legally effective.
Signatures
Signed for Alderwick Mobility Systems Limited by Elliot Marsh, Procurement Director Signature: ____________________ Date: 6 April 2026
Signed for Penrose Precision Components Limited by Rhea Kapoor, Managing Director Signature: ____________________ Date: 6 April 2026