What is a Wholesale Agreement?
A wholesale agreement is a legally binding contract between a wholesaler and a retailer that clearly lays out the terms and conditions of purchases. Although there are multiple ways for businesses to conduct themselves, establishing a wholesale agreement template between wholesaler and retailer provide for a smooth and predictable sale between both parties.
Commonly used in the purchasing of goods, a wholesale agreement is a business contract between a wholesaler and a retailer that stipulates how products are to be sold, who they are to be sold to, when delivery is to be made , and how much is to be paid for the products. These clauses touched upon in the agreement make sure that both business parties are in accord with not only how the goods are to be purchased but also how they are to be sold and at what price. Generally, after both parties sign the agreement it is legally enforceable in a court of law.
The nature of the relationship is important to the success of sales as well as the long term viability of the product on the market. In some cases the agreement can be used by retailers as a guarantee of supply, especially in fast moving consumer goods, and allow businesses to take steps to protect their own intellectual property. For the wholesaler it guarantees their product will not enter into free competition.
Elements of a Wholesale Agreement
Not every wholesale agreement is created the same way or for the same type of relationship. However, there are key components that every wholesale agreement template should contain. Without these components, you risk the integrity of your business. Here are just a few key components that are typically of high value in any wholesale agreement:
Parties
The parties involved are not always limited to the two who own the agreement. You may have suppliers and retailers, reputation protection clauses, or even insurance policies that can depreciate or go away if any of the third-party agreements are broken.
Payment Terms
When do you get the money? What about payment gateways, delivery payments and due dates? Specificity in every subclause of a payment term is important to the success of a wholesale agreement regardless of whether the parties are direct competitors or not.
Delivery
Delivery terms adjust and assume risk. For instance, the term "ex-warehouse" wants to avoid transfer of any risk for the items being sold. Sometimes, the liability is deferred until the product is sold. Sometimes, it passes on to the seller. Ultimately, it is up to the parties to determine their risk and how much of it they want to pass along to a third party with a keen focus on winning a bid.
Legal Obligations
Legal obligations can include safeguards and warranties, binding arbitration clauses and the imposing of state or governing laws (for instance, trademarks) to the contract.
Advantages of Using a Wholesale Agreement Template
The benefits of a template wholesale agreement are plentiful. First and foremost, a pre-designed agreement will save time. Since most of the terms of the relationship will have already been settled in the template, negotiating the final agreement will require much less time than starting from scratch with each new supplier or purchaser.
Second, a template greatly reduces the possibility that any parties’ obligations will contain both vague and unclear terms. For example, if all purchase orders to suppliers are for a minimum (but to be negotiated) quantity, but the template also requires a minimum price per unit, many parties may agree to accept an order for a few units just to preserve the customer relationship. However, if the template contract clearly states that a seller is not required to provide more than a de minimus number of items or that a purchaser is required to take delivery of and pay for at least 50 widgets, a supplier should not manufacture a dozen widgets expecting to satisfy its obligations under the contract. Templates with clear terms also allow a user to know before getting into an agreement whether the supplier or purchaser will be getting the better of the deal.
Having a set form will also allow the parties to easier identify the "deal-breakers" in a proposed transaction, and insert any necessary contract language to protect themselves. Finally, this type of agreement document protects the parties financially. In the event that one party does not perform according to the contract terms, the other may be eligible to pursue legal remedies.
How to Modify a Wholesale Agreement Template
Personalizing the content of your wholesale agreement is best done after you sit down and assess the various parts of your agreement that you plan to keep, those that you will be discarding, and the sections that need alteration. For example, you may have a template that contains multiple sections devoted to payment terms or penalties for late payments. If your business typically has a few clients that are late with payments, you may want to remove a section or two with language on penalties until you can circulate a revised document with the new policy that permits unconditional acceptance of later payments. Your template might also show that you need a section added that states your process for ending the relationship with a specific wholesaler, although it will need to use language that satisfies your unique company’s standards for severing ties with a wholesaler.
You’ll also have to consider the industry you operate your business in when working on your wholesale agreement template. For instance, all of the sales agreements in the fast food industry might have specific termination clauses that will have to be clearly stated. In other situations, the wholesaler may have certain terms that they want the agreement to contain. When you personalize your wholesale agreements, be flexible so that you may alter language based on your particular needs and the needs of your business partners.
Pitfalls to Avoid When Creating a Wholesale Agreement
One of the most significant pitfalls in wholesale deals is the lack of clarity in the terms of an agreement. When it is not crystal clear what products are being purchased, by whom and under what conditions, a misunderstanding or miscommunication between the parties regarding the nature of the deal is all but inevitable. Any how-to create a wholesale agreement guide is incomplete without offering examples of those terms which should be clearly delineated to prevent future commercial disputes.
A vital component of any wholesale contract is a drop-dead date at which the contract will no longer remain in effect (in either direction). You can use a "term" with a "renewal" or "right of extension" clause, or some combination thereof so as to keep your options open.
Another common error in wholesale agreements is the lack of a mechanism to enforce a cure, or default provision – ideally one that clearly lays out the process for breach and a timetable for repairs, or cures. Whatever form your cure provision takes, you don’t just want to give yourself a means of redress if something goes wrong , you also want to set up your business counterparty to succeed by having realistic expectations of their compliance with your agreement.
Too often parties to a wholesale agreement assume that certain (important) terms record agreements that are not set down in writing, or merely in one of the counterparty’s e-mails. Do not allow this to happen to you; contain any major recitals in a written agreement, or risk competing stories about what was actually agreed to by the parties.
Another area where wholesale agreements can tend to go awry is in their language. It is important to clearly spell out what each party’s duties, responsibilities, and authority have, or do not have, under your agreement. Leaving these matters up to interpretation puts you back in the realm of competing interpretations of vague terms, making it more likely than not that you will end up in court to settle your dispute.
One last word about wholesale agreements: don’t go off half-cocked, with a document that contains all manner of boilerplate terms, provisions, and clauses, that have absolutely nothing to do with your agreement with your business counterparty. The more complicated your agreement, the more likely it is that you are going to find a typo or some other small problem that is going to cost you time and money to correct.
Legal Issues with Wholesale Agreements
Before you get to the drafting stage, it is essential that you pay close attention to the legal considerations for a wholesale agreement template. Some of these considerations include jurisdictional laws (meaning the local laws where the wholesaler is conducting business), dispute resolution clauses, and contract enforceability. If you are drafting a generic wholesale agreement template which can be used across jurisdictions, it is important to avoid an application to a jurisdictional law that may be specific to certain countries. For example, the laws of Germany allow a seller to unilaterally withdraw from an exclusive distribution agreement at any time. However, such a unilateral withdrawal from a wholesale agreement may not be advisable for similar agreements in China or Kosovo, because unilateral withdrawals may be contrary to Chinese law or Kosovar. Therefore, your draft wholesale agreement template must be considerate of the jurisdictional environment in which it will be applied. In addition to the template being considerate of jurisdictional environment, it is also important that the template be considerate of any dispute resolution clauses that are mandatory for a specific jurisdiction. Many jurisdictions will require that a particular form of dispute resolution be used to settle a wholesale agreement dispute. For example, the jurisdiction of Dubai requires any dispute arising from a wholesale agreement to be settled by arbitration, whereas the jurisdiction of Singapore allows for any dispute to be settled by negotiation, mediation, arbitration, or the court, depending on the parties’ preferences. Lastly, when you are drafting your wholesale agreement template, you must also consider whether or not the template is enforceable. If you are applying your template to a jurisdiction in which the enforceability of wholesale agreements has been limited by the legislator or the court, your agreement may not survive an attempt to enforce it. Drafting a wholesale agreement template becomes a lot easier once you become familiar with the legal environment in which you will be applying the document.
Where to Find the Right Wholesale Agreement Template
Once you’ve decided to use a wholesale agreement template for your business, the next step is to identify a document that can serve as the foundation of your contract. By using a template, you can save the time and expense of having a lawyer create an agreement from scratch.
A good rule of thumb when seeking a wholesale agreement is to find a document that’s relevant to your jurisdiction, as laws vary from one state to another. To this end, it may be beneficial to search through online legal resources to find those documents that specifically contain state-specific language.
When looking through any online resource, however, you’ll want to make sure that the document you find is legally sound. To this end, it’s generally a good idea to make sure that the documents you’re considering meet these criteria:
Any time you read through a wholesale agreement template, you want to look for good form and balance. In a legally sound contract, each party has rights and responsibilities — if you merely find a one-sided agreement, or one that lacks critical components, you’ll want to look elsewhere.
If the template fails to address issues that are important to your business, it may not be appropriate for you. While you can always modify the agreement yourself, you may be better off seeking out a document that’s already been well-written.
Similarly , when you access a wholesale agreement template, you should make sure that the document meets your goals as a retailer or wholesaler. For example, when it comes to the retailer-wholesaler relationship, different businesses have different priorities — retailers may want distributors to retain responsibility for damaged goods, for instance. When evaluating a document, make sure that it’s consistent with your position.
In some instances, you may find documents on the internet that are free for anyone to access. Such agreements may see free use in an educational context, but they may not be appropriate for actual wholesale agreements. Generally speaking, the most reliable templates for wholesale agreements take the form of paid products — that is to say, you’ll be better off using a paid document than a freebie that’s indiscriminately available.
Ultimately, as you seek the right wholesale agreement template, make sure that you don’t simply find an option at random. Instead, you should think carefully about the types of contracts you want to use.
You should also explore your options before choosing the template that’s right for you. By doing thorough research, you can ensure that you find the best document for your contract. In so doing, you can move forward with the wholesale agreements that will allow you to grow your business.