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Whether your client is engaging suppliers or providing its own goods or services, a key aspect of any supplier-customer contract is whether the agreement is a once-off or a framework agreement. A once-off agreement is a contract where a party supplies goods or services as a one-off project. On the contrary, a framework agreement (also called an order agreement) is useful for relationships where they will supply goods or services on an ongoing basis. This article discusses the key aspects of a framework agreement, its benefits, and how to implement one within your team. 

How Does a Framework Agreement Work?

A framework agreement allows the supplier and customer to agree upon core legal terms upfront. Then, each time the customer wishes to place an order with the supplier, each order forms part of the previously negotiated agreement. This means that the parties only need to agree to the commercial details each time they place an order. For example, the volume of goods to be supplied, or timeframes for delivery. The core agreement may even specify some of the commercial terms to apply across all orders. For example, a price list and payment terms. This way, there is even less to negotiate each time they place an order.

The key benefit of a framework agreement is that it streamlines recurring commercial relationships. As the legal terms have already been agreed in advance, the parties need to agree to fewer terms at the order stage. This allows for commercial teams to negotiate most orders without the need for legal involvement. 

When Would a Framework Agreement Be Useful?

Example 1: Your client is a retail store that has a number of product suppliers. You agree on the core legal terms to apply to each supplier. Each time your store managers need to place an order for products with a supplier both parties have already agreed to the price list, payment terms, and legal terms. The store managers and the suppliers may negotiate on the volume of products the supplier will supply and delivery dates. 

Example 2: Your client has a relationship with an external marketing agency that prepares television campaigns. You agree on a core set of terms with the marketing agency. Each time your client requires a new television campaign, your internal marketing team can issue an order to the marketing agency. This will specify the timeframe, price and deliverables associated with the campaign. 

How to Implement a Framework Agreement

1. Implement an Order Structure

The core legal terms of the agreement must state that the agreement operates as a framework or order agreement. This means orders can be issued and accepted under the agreement. It also means each order is subject to the terms of the agreement. 

2. Set Out the Process for Issuing Orders in the Agreement

Where you are the supplier, you may prefer the client to place orders via a specific process. For example, via your online ordering system. You may also have requirements as to what an order must contain. On the other hand, where you are the client, you may wish for more flexibility in placing orders. For example, over the phone and email, and in the contents of an order. 

3. Specify When the Order Becomes Binding 

When you are the supplier, you may wish to specify that an order issued by the customer will be binding only once accepted by both parties in writing. Where you are the client, you may consider implementing a regime whereby you deem orders to be accepted by the supplier a certain number of days after being issued. 

4. Specify Which Terms Prevail in the Event of Inconsistency

The typical approach is for the terms of the agreement to prevail. However, consider whether you can agree on any special conditions and whether these special conditions may take precedence.  

5. Consider the Impact of Termination of the Agreement for Each Order

You may wish to specify that each order continues until it is complete or otherwise by a specific end date in the order

Key Takeaways 

Framework agreements are excellent tools that can streamline and simplify your commercial relationships. They are well suited to relationships where one party places repeated requests for goods or services, whether your client is the supplier or the customer. In order to implement a framework agreement, you must structure the core legal terms to allow for orders to be issued, consider the process for orders, and consider the interaction between the order and the core agreement (for example, in the event of termination or inconsistency). 

If you need help drafting a framework agreement for your business, contact LegalVision’s contract lawyers on 1300 544 755 or fill out the form on this page. 

Frequently Asked Questions

What is a framework agreement?

A framework agreement allows the supplier and customer to agree upon core legal terms upfront. Then, each time the customer wishes to place an order with the supplier, each order forms part of the previously negotiated agreement. This means that the parties only need to agree to the commercial details each time they place an order.

What is a once-off agreement?

A once-off agreement is a contract where a party supplies goods or services as a one-off project.

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