If you own a business providing goods or services, you may have heard of a ‘framework agreement’, ‘work order agreement’ or ‘service order agreement’. Essentially, they all refer to the same type of contract outlining your legal responsibilities to customers. This article will explore: 

  • what a framework agreement is;
  • when you would need one; and 
  • how to use a framework agreement in practice.

What is a Framework Agreement?

A framework agreement is an agreement between you and a customer for the provision of your goods or services. 

Once this agreement is executed, your customer can send requests to provide further goods and services, and you can simply respond to these requests. This means that you do not have to renegotiate a new agreement each time.

A framework agreement will typically include:

  • a schedule which contains the critical commercial details relevant to the engagement between you and the customer (for example, you and your customer’s details, a description of the goods or services, the price and payment terms);
  • terms and conditions which govern the agreement; and
  • a form of order, a document which you can issue to your customer without having to attach the entire contract each time.

When Do You Need a Framework Agreement?

Framework agreements are perfect for where you anticipate providing goods or services to your customer on an ongoing basis. 

For example, a framework agreement could be suitable if you provide marketing services to a regular client who hires you to create campaigns for different products.

The main benefit of a framework agreement is that you can ‘lockdown’ the terms and conditions which govern the relationship between you and your customer once, at the start of the relationship. Then, when new work comes up, you can simply send an order to your customer, without having to work out these terms again.

How Do You Use a Framework Agreement?

Using a framework agreement will always depend on your particular circumstances. However, generally, the process will involve two key steps.

1. Negotiate and Execute the Agreement

You will first need to negotiate the agreement with the other party. Then, ensure that the schedule of your framework agreement contains the commercial details relevant to the scope of the engagement.

In the example of the marketing campaign, the commercial details might relate to an initial six-week marketing campaign for a new product your customer is rolling out, for a fixed price.

2. Issue Orders

When you receive requests for further goods and services from your customer, you can accept the request and issue the order without any further negotiation.

After receiving a request for further goods or services, you can issue the form of order, which will contain the details specific to the arrangement.

Using the marketing example again, if your client has requested that you market a new line of products, you would simply issue an order reflecting the: 

  • new price;
  • new description; and 
  • period of the campaign.

Crucial Considerations

When having a framework agreement drafted by a lawyer, you will need to determine a number of factors. This is crucial because what you decide will then be reflected in the contract. Key considerations include:

  • whether each order will terminate if the agreement is terminated, or if you would prefer for individual orders to continue to run even if the agreement is terminated;
  • if you need the contract to include the ability to have special conditions where there are special requirements relevant to a particular order;
  • how you intend for orders to be issued. For example, if you will require a written order to be signed by your customer; and
  • if you will allow specific commercial terms to be decided in the order form, or if they will be fixed. For example, you may wish to enable flexible 30-day payment terms for one product.

Key Takeaways

A framework agreement is an excellent way of engaging customers regularly. It will allow you the flexibility to update the details of your arrangements as you receive new requests to provide your products. Having a framework agreement in place also means that it does not matter if you only use the agreement on a one-off basis – it will still be effective. If you have any questions about framework agreements, contact LegalVision’s contract lawyers on 1300 544 755 or fill out the form on this page. 

About LegalVision: LegalVision is a tech-driven, full-service commercial law firm that uses technology to deliver a faster, better quality and more cost-effective client experience.
Robert Nay

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