What are they?
Manufacturing and supply arrangements sit at the heart of many businesses. When they work well, they are almost invisible. When they fail, the impact is immediate: missed deadlines, strained customer relationships and financial loss. Recent supply chain disruption, fluctuating raw material costs and ongoing regulatory change have shown just how exposed businesses can be when contracts are not built to withstand pressure.
For businesses operating in England and Wales, a manufacturing and supply agreement should do more than record the commercial deal. It should act as a practical risk management tool, anticipating areas of tension and allocating risk in a way that reflects the realities of the relationship.
What are the key aspects?
One of the most common sources of dispute is uncertainty about what is actually being supplied. Specifications that are too general, inconsistent or spread across emails and informal documents create scope for disagreement. A resilient contract clearly describes the goods, sets out relevant technical standards and explains any testing or acceptance procedures. Where products are bespoke, the technical schedules need to align carefully with the legal drafting. Ambiguity in this area often leads to arguments about whether goods meet the required standard or whether they have been validly rejected.
Pricing is another pressure point. Fixed pricing may work in stable markets, but volatility in energy, transport and raw materials has made long-term certainty harder to sustain. Suppliers may seek mechanisms that allow for price adjustments linked to objective indices or demonstrable increases in input costs. Customers, on the other hand, need predictability for budgeting purposes. The solution usually lies in drafting clear and measurable adjustment provisions, with defined triggers and notice requirements. A clause that is too rigid may create commercial strain; one that is too broad may undermine financial planning.
Continuity of supply has also become a central concern. Customers increasingly want comfort that their supplier can continue to perform even in challenging circumstances. This may involve obligations to maintain minimum stock levels, restrictions on subcontracting or commitments to maintain business continuity and disaster recovery plans. In critical supply arrangements, customers may also seek access to tooling or key documentation if the supplier becomes unable to perform. While such provisions require careful negotiation, they can provide clarity about how disruption will be managed.
Risk allocation sits at the core of any supply agreement. Under English and Welsh law, parties are generally free to determine how liability is allocated (subject to statutory controls). Liability caps are commonly linked to a multiple of annual contract value, and exclusions of indirect or consequential loss are typical. The important point is proportionality. A cap that is unrealistically low may offer little real protection, while unlimited exposure is unlikely to be commercially acceptable. The liability framework should reflect the scale and importance of the contract.
Force majeure provisions have received renewed attention in recent years. English and Welsh law does not automatically excuse non-performance because circumstances have become more difficult, instead protection must be expressly drafted. A well-considered clause will define the relevant events, require prompt notice and deal with the consequences of prolonged disruption. Similarly, change in law provisions are increasingly relevant, particularly in regulated sectors. These clauses should address who bears the cost of compliance and whether pricing can be revisited if obligations materially change.
Intellectual property should not be overlooked, particularly where products are designed or adapted for a specific customer. Ownership of designs, tooling and related rights should be clearly addressed, along with any ongoing rights of use. Failure to deal with these issues expressly can create uncertainty and long-term commercial risk.
Finally, resilient contracts consider how the relationship might end. Clear termination rights, notice periods and practical exit arrangements (including final orders and transfer of materials) help reduce the risk of disruption at what can be a sensitive stage.
Final thoughts
Manufacturing and supply agreements should not be treated as standard documents to be signed and forgotten. Taking time to ensure that obligations are clear, risk is proportionate and flexibility is built in where needed can make a significant difference when trading conditions become difficult. For businesses in England and Wales, a proactive review of supply contracts is one of the most effective ways to build long-term resilience.
Berry Smith consistently draft, advise and review Manufacturing and Supply Agreements for our clients. If you have any queries or need any assistance relating to these types of agreements, please do not hesitate to contact us at commercial@berrysmith.com or on 029 2034 5511.