Review guide · Supplier and distribution agreements
How to review a supplier or distribution agreement before you sign
What to check in a supplier, wholesale or distribution agreement before signing: minimum order quantities, price-change rights, exclusivity and territory, delivery and acceptance, payment terms, and termination.
Supply agreements decide the cost of goods and the terms on which your business can change suppliers, and both are set by clauses that read as administrative: a minimum order quantity, a price list the supplier may revise, an exclusivity grant, and payment terms that start the clock before the goods arrive.
Whether you buy inventory for an ecommerce brand, components for a manufacturer, or product for a distribution territory, these are the clauses to read before you sign.
Who usually signs it: The owner or purchasing lead, usually on the supplier's standard terms of sale or a distribution agreement they drafted.
The clauses to check, in order
- 01
Minimum order quantities and take-or-pay
Why it matters: A minimum turns inventory risk into contractual debt: fall short and you owe the shortfall or lose the pricing tier.
What to ask for: Minimums measured annually, not per order, with a shortfall remedy limited to repricing rather than payment for goods not taken.
- 02
Price-change rights
Why it matters: "Prices per supplier's then-current price list" lets the supplier reprice at will, sometimes on orders already placed.
What to ask for: Prices fixed for a defined period, changes on 60–90 days' written notice, no changes to accepted orders, and a cap tied to a named input index if one is justified.
- 03
Exclusivity and territory
Why it matters: Exclusive-supply clauses stop you from second-sourcing; distribution exclusivity may come with performance targets you did not negotiate.
What to ask for: No exclusivity, or exclusivity in exchange for price protection and the right to second-source on a supply failure.
- 04
Delivery, risk of loss and acceptance
Why it matters: Incoterms and shipping terms decide who owns the goods in transit and when; a short inspection window makes defects your problem.
What to ask for: Risk passing on delivery to your dock, a 30-day inspection and rejection right, and a defined process for returns of nonconforming goods.
- 05
Payment terms and late-payment remedies
Why it matters: Net terms measured from invoice date rather than delivery, interest on late payments and a right to suspend shipments give the supplier leverage in any dispute.
What to ask for: Net 30 from delivery and acceptance, interest at a stated modest rate after a cure period, and no suspension of shipments over a disputed invoice.
- 06
Term, renewal and termination
Why it matters: Long terms with auto-renewal and termination only for cause tie you to a supplier whose pricing or quality may drift.
What to ask for: A one- or two-year term, termination for convenience on 90 days' notice, and a last-time-buy right if the supplier discontinues a product.
Before you sign: the checklist
- Compare the minimum to your trailing twelve months of purchases.
- Find every reference to the price list and how it changes.
- Check for exclusivity in either direction.
- Confirm shipping terms, risk of loss and the inspection window.
- Read payment terms: when the clock starts, interest, suspension rights.
- Confirm term, renewal and how either side can end it.
Run the interactive 12-point red-flag checklist → · Find the last day to give notice →
Have one of these on your desk?
Upload it and Sidecar returns a verdict, a 0–100 risk score, every clause above flagged with the text quoted, every date that can cost you, and the negotiation points with suggested wording. A Sidecar reviewer looks it over on request. The first review is free.
Questions
What is a take-or-pay clause?
A commitment to pay for a minimum quantity whether or not you take delivery. It converts a forecast into a liability. The usual fixes are an annual rather than per-order minimum, and a shortfall remedy that reprices the goods you did buy instead of charging for goods you did not.
Do the supplier's terms of sale override our purchase order?
That depends on which document governs and what each says about conflicts — the "battle of the forms." A review flags where the supplier's terms claim priority and what that means for warranties, liability and payment.
Does Sidecar review supply agreements?
Yes. Supply and franchise or distribution agreements are among the types the review classifies. Upload the agreement, the terms of sale and the current price list, and the review reads them together.
Clauses explained
Other agreement types
Definitions and negotiation guidance here are educational business decision support, not legal advice. Consult an attorney about how any clause applies to your own agreement.