This Manufacturing Agreement is an agreement between a company which has
developed a product (the client) and a manufacturer. This agreement sets out terms for:
how the manufacturer will manufacture the product in accordance with the product
specifications and know-how, payment, product production forecast, ordering, inventory
management, delivery and shipping, product liability and refunds, and respective
liabilities. This form contains both standard clauses and opportunities for the use of
optional terms and conditions making it fully customizable to fit the needs of the
THIS MANUFACTURING AGREEMENT (the “Agreement”) is made on the ____ day of
___________ 20__ (the “Effective Date”) entered by and between _______________________,
hereinafter called “CLIENT”, and ___________________________, hereinafter called the
WHEREAS, the CLIENT is engaged in the business of _____________________________.
WHEREAS upon and subject to the terms and conditions of this Agreement, CLIENT has
retained MANUFACTURER’s services to provide manufacturing services for the
______________________________________ (“Product”). [Comment: insert description of
NOW, THEREFORE, for good and valuable consideration, the receipt and adequacy of which
are hereby acknowledged, the parties hereto agree as follows:
The MANUFACTURER hereby agrees and undertakes to manufacture the said Product strictly
in accordance with the know-how, standards and specifications disclosed in compliance with the
product specifications described in Schedule I (the “Product Specifications”). Both during the
term and following termination of this Agreement, in perpetuity, MANUFACTURER shall not
supply the Product (or any prototype thereof), or Product Specifications, to any third party
This Agreement shall commence on the effective date, _____________, and shall continue for an
initial term of _________________ [one (1) year] [Comment: these numbers should be
altered to fit the agreement of the parties]. This Agreement shall automatically be renewed for
successive one (1) year increments unless either party requests in writing, at least ninety (90)
days prior to the anniversary date that this Agreement not be so renewed.
3. PRODUCT FORECAST.
CLIENT will provide an annual __________ [twelve (12)] month forecast and a monthly
________________ [six (6)] month rolling Product forecast to MANUFACTURER. This section
may be modified from time to time by an addendum and information provided herein shall be
treated as Confidential Information as defined in this Agreement.
4. MATERIAL PROCUREMENT.
MANUFACTURER is authorized to purchase materials using standard purchasing practices
including, but not limited to, acquisition of material recognizing Economic Order Quantities, and
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long lead time component management in order to meet the forecasted requirements of CLIENT.
CLIENT is responsible for material to the extent that (i) material was purchased by
MANUFACTURER to support the Product forecast and agreed upon safety stock; (ii)
MANUFACTURER exercised reasonable business judgment in managing suppliers and lead
times and _____________________________________ [Comment: user should add
additional provisions here]
5. PURCHASE ORDER; INVENTORY.
A. The first _____ [three (3)] months of the Product forecast will be a firm commitment for
MANUFACTURER to deliver and for CLIENT to accept deliveries. CLIENT shall issue
a purchase order for each lot of product purchased, and shall order in minimum quantities
of _____, (“Units”). The minimum lifetime production shall be _____ Units, not to be
purchased later than ____________. The parties shall cooperate to purchase long lead
items and obtain quantity discounts beyond the three-month rolling forecast. CLIENT
shall have the authority to revise or cancel a purchase order for Product and may also
eliminate a component from a Product. However, if any revision or cancellation of a
purchase order ("Order"), or elimination of a component or revision of forecast
(downside) by CLIENT causes excess inventory, MANUFACTURER shall identify all
potential liability of CLIENT for material on order, material on hand, work in process,
and finished goods. MANUFACTURER shall undertake commercially reasonable efforts
to minimize charges to CLIENT by cancelling all applicable material purchase orders and
diverting materials for different or alternate programs. CLIENT agrees to compensate
MANUFACTURER for costs incurred for finished goods (including profit); work in
process (including labor performed); material on hand which could not be returned or
used for other clients and at other sites of MANUFACTURER; material on order which
could not be canceled; applicable material supplier's restocking or cancellation fees; and
agreed MANUFACTURER handling charges.
B. MANUFACTURER will report its inventory position to CLIENT on a monthly basis,
including the following dat