Before you sign
A supply agreement sets out what is being supplied and to what specification, delivery or performance dates, price and payment, when risk and ownership pass, warranties, limits on liability, intellectual property, termination and what happens if events outside anyone’s control get in the way.
Suppliers most often get caught by uncapped liability, wide indemnities, long payment terms and no right to stop supplying a customer who has not paid. Customers most often get caught by delivery dates that turn out to be estimates, warranties and implied terms excluded almost entirely, and liability caps so low that a serious failure leaves them with little recourse.
QuickLegalCheck reads the whole agreement from your side, supplier or customer, rates every clause, flags what is missing and suggests wording. The full report is £49 + VAT.
Why it’s worth checking
Supply agreements get treated as routine paperwork, and the terms usually only come out when something has gone wrong: goods arrive late or faulty, a customer refuses to pay, or a claim lands that is out of all proportion to the contract price.
Take a hypothetical customer that orders materials it needs for its own production run. The supplier’s terms say delivery dates are “estimates only” and time for delivery is not of the essence. The materials arrive two weeks late and the customer misses its own deadlines. Under those terms, the customer is unlikely to be able to cancel, and the supplier’s liability clause may exclude the loss of profit it suffered. Had the customer negotiated a firm date, with a right to cancel or claim compensation if it was missed, it would have been in a much better position. If a contract fixes no time at all, the Sale of Goods Act 1979 says goods must be delivered within a reasonable time, which is rarely precise enough to rely on.
Now the other way round. Imagine a service provider that signs a customer’s standard terms with no cap on its liability and an indemnity for “all losses arising from the services”. A modest error leads the customer to claim a large sum in lost business. Without a cap, the provider’s exposure is limited only by the general rules on causation and on what losses were reasonably foreseeable, and the indemnity may reach further still. A cap linked to the fees paid under the contract, with a clear exclusion of indirect loss, is common and usually worth pushing for.
Between businesses, the law implies terms into contracts for goods (that they match their description, are of satisfactory quality and fit for purpose) and for services (that they are carried out with reasonable care and skill). These can usually be limited or excluded, but under the Unfair Contract Terms Act 1977 most such exclusions must be reasonable, and the implied term about the supplier’s right to sell the goods cannot be excluded at all. If you are selling to consumers, the Consumer Rights Act 2015 applies instead and the statutory rights cannot be taken away.
Key terms to look for
Specification and quality
What is being supplied, to what standard, and how the customer accepts or rejects it. A vague specification is a common starting point for a dispute.
Delivery and performance
Dates, place and method of delivery, and what happens if they are missed. Check whether dates are firm or only estimates.
Price and payment terms
The price, whether it can change, when invoices can be raised and when they must be paid, and any interest on late payment.
Warranties
What the supplier promises about the goods or services and for how long, and whether the terms implied by law are excluded or replaced.
Liability and indemnity
Caps on liability, excluded types of loss and any indemnities. Some liabilities, such as for death or personal injury caused by negligence, or fraud, cannot be excluded.
Intellectual property
Who owns designs, tooling, software or other IP created during the relationship, and what licence the customer gets to use it.
Termination
How and when either side can end the agreement, including for breach or insolvency, and what happens to orders already placed.
Force majeure
Relief if performance is prevented by events outside a party’s control. English law has no general force majeure doctrine, so without a clause you are left with the much narrower rules on frustration.
Common mistakes
Delivery dates that are vague or only estimates
Phrases like “as soon as possible” or “estimated delivery” make it hard to show the supplier is in breach. A fixed date or period, such as within 15 working days of order, is better, together with what the customer can do if it is missed: a right to cancel, compensation or both.
No liability cap, or one that does not fit the deal
For suppliers, unlimited liability means one mistake can cost far more than the contract is worth. For customers, a cap set at a small fraction of the price may leave them carrying most of the risk. Caps between businesses must be reasonable under the Unfair Contract Terms Act 1977, and certain liabilities cannot be capped at all.
Warranties that are too wide or too narrow
A supplier that gives broad promises beyond what it can control takes on unnecessary risk. A customer that accepts terms excluding all warranties, including the implied ones, may have no contractual remedy for defective goods. The warranty should say what is promised, for how long and what the remedy is, such as repair, replacement or refund.
Unclear payment terms and no right to suspend
If the agreement does not say when payment is due, arguments follow. Suppliers should include clear payment dates, a right to suspend deliveries if invoices are overdue and, for goods, a retention of title clause. Statutory interest under the Late Payment of Commercial Debts (Interest) Act 1998 usually applies between businesses unless the contract provides a substantial alternative remedy.
Missing termination rights
Without clear termination rights, a long-term supply agreement can be difficult to leave, and it may be unclear what happens to orders already placed. Notice periods, rights to terminate for material breach or insolvency, and what is paid for work in progress should all be spelled out.
Best practice
If you are the supplier, cap your liability at a level linked to the value of the contract, exclude indirect and consequential loss, and make sure you are not giving indemnities wider than the cap unless you mean to. Keep the specification precise enough that there is little room to argue about what was ordered. Set clear payment dates, include a right to suspend supply for non-payment and, if you supply goods, a retention of title clause so you keep ownership until you are paid. Give warranties that reflect what you can actually stand behind, and include a force majeure clause.
If you are the customer, push for firm delivery dates and a clear remedy if they are missed. Make sure the specification and acceptance tests are precise enough that you can reject goods or services that fall short. Check what warranties are given, how long they last and whether the terms implied by law have been excluded. Look at the liability cap and ask whether it would cover a realistic worst case. Make sure you can terminate for serious or repeated breach, and check when risk in the goods passes to you so your insurance is in place.
Questions
What can I do if the supplier delivers late?+
It depends on the agreement. If the delivery date is firm and time is stated to be of the essence, missing it usually lets you terminate and claim damages. If the date is only an estimate, you are generally limited to claiming damages for any loss the delay caused, and only if the delay is itself a breach. Some agreements set out a specific remedy, such as a right to cancel after a period of delay or fixed compensation per day. Check the clause before you accept a late delivery, as accepting it may affect your options.
Can I get a refund if I am not happy with the quality?+
For consumers, the Consumer Rights Act 2015 gives a short-term right to reject faulty goods for a full refund, usually within 30 days, and further remedies after that. Between businesses, the position depends on the contract. The Sale of Goods Act 1979 implies terms about quality and fitness for purpose, but a business contract can limit or exclude them if that is reasonable, and a business buyer cannot reject goods for a breach so slight that rejection would be unreasonable. Check what the agreement says about inspection, rejection and remedies.
Who is responsible if goods are damaged in transit?+
Whoever bears the risk at that point. The agreement should say when risk passes, for example on dispatch, on delivery or on acceptance. If it is silent in a business contract, the default under the Sale of Goods Act 1979 is that risk passes with ownership, which may not be what either side expects. For consumer sales, goods generally remain at the trader’s risk until they are delivered to the consumer.
Can the supplier change the price after I have ordered?+
Once an order has been accepted, the price is fixed unless the agreement allows it to be changed, for example for increases in raw material costs, currency movements or changes you make to the order. If you want certainty, ask for the quoted price to be fixed for a stated period, or for any price change to require notice and give you a right to cancel.