Business Contracts – Contract Manufacturing Agreements

Contract Manufacturing Agreements

A contract manufacturing agreement is an agreement entered between a manufacturer of goods and a customer that requires manufacturing services in a business-to-business context. Contract manufacturing can be viewed as outsourcing of manufacturing services from a manufacturing business. The services can vary from manufacturing of individual components to manufacturing a finished product with the customer’s specifications. Sometimes the manufacturer is deeply involved in product design alongside the customer to produce detailed specifications.

There are many issues that need careful consideration when reviewing or drafting a contract manufacturing agreement including product specifications, quality control, packaging requirements, intellectual property rights, indemnities, pricing and payment terms, and delivery. Contract manufacturing agreements can be complex depending on the arrangement and the type of product to be produced.

For instance, the agreement may need to set out in sufficient detail the intellectual property rights required to manufacture the goods. This includes details of ownership and licence to use any party’s intellectual property rights. Depending on the arrangement and the nature of the goods to be produced, intellectual property ownership may vest in either party and a distinction needs to be made as to which party owns described intellectual property rights. A business may not want unnecessary restrictions in a manufactured product that they intend to incorporate with their own for resale to third parties. Equally, a party with patent rights needs to ensure that the contract manufacturing agreement has sufficient protections for the patent rights in question in case they are compromised through misuse or infringement.

Often our work requires time and expertise due to the complexity of the agreement depending on the stage of the relationship between the parties. However, it is often easier to conclude a contract manufacturing agreement between parties that have established a long-standing custom which they previously outlined in a business contract or documented in other form of a binding legal instrument.

We will support you to review a draft third-party contract that has been presented to you for negotiation or approval and signing. We can also support you when instruct us to draft a bespoke contract manufacturing agreement from scratch.

Contract Manufacturing Agreements – Scenarios

When it comes to getting expert legal advice on contracts, no matter what type they are, “dotting the I’s and crossing the T’s” is paramount – getting it right now could save a lot of time, money and inconvenience later. Talk to our expert team today on 0800 088 6004 for a free, confidential, no-obligation initial chat.