Your retail business depends on reliable inventory at predictable prices. A poorly drafted supplier agreement can lead to stock-outs, quality disputes, or payment conflicts.

Under Australian contract law (primarily common law plus the Competition and Consumer Act 2010 – specifically the Australian Consumer Law or ACL), certain terms are essential.

This article lists the non-negotiable legal elements every retail supplier agreement must include.

1. Goods Specification and Quality Standards

Vague descriptions lead to disputes. Specify:

  • Product name, SKU, brand, model number.
  • Dimensions, weight, materials, country of origin.
  • Acceptable defect rate (e.g., no more than 0.5% of units damaged).
  • Compliance with mandatory safety standards (e.g., ACCC product safety regulations for toys, electronics, clothing).
Under ACL s54, goods must be of 'acceptable quality' – fit for purpose, durable, safe. This is a non-excludable consumer guarantee. Even if your contract says 'no warranties', the ACL overrides it for consumer transactions.

2. Pricing and Payment Terms

Clear payment terms avoid cash flow surprises:

  • Unit price (excl. GST). Specify whether GST is additional.
  • Volume discounts, rebates, or trade spend allowances.
  • Payment due date (e.g., 30 days from invoice).
  • Late payment interest (must be a 'genuine pre-estimate of loss' – typically 2–5% above RBA cash rate).
  • Currency (AUD unless otherwise agreed – foreign currency contracts carry exchange rate risk).

3. Delivery and Risk (Incoterms)

Who bears the risk if goods are damaged in transit? Australian contracts commonly use:

  • Free On Board (FOB): Supplier's risk until goods loaded onto ship in origin country. Buyer bears risk from that point.
  • Delivered At Place (DAP): Supplier bears all risks and costs until goods arrive at your retail store or warehouse.
  • Ex Works (EXW): You bear risk from the supplier's loading dock. Avoid this unless you have specialised freight insurance.

Also specify delivery windows (e.g., 8am–12pm Monday to Friday) and what happens if the supplier is late (e.g., 2% discount for delays over 5 days).

4. Minimum Order Quantities and Exclusivity

Many suppliers require MOQs to make production economical. Negotiate:

  • Initial order MOQ.
  • Re-order MOQ (should be lower – e.g., 50% of initial).
  • Exclusivity clauses: 'Supplier agrees not to sell competing products to any other retailer within 5km of your store.' This is valuable but may require a higher MOQ or a minimum annual spend.

5. Intellectual Property and Branding

If you sell private label or branded products:

  • Supplier warrants that the goods do not infringe any third-party patent, trademark, or design right (indemnity clause).
  • If you provide designs, specify that all IP created for you belongs to you (assignment clause).
  • Licence to use supplier's brand logos (if you are an authorised reseller).

6. Termination and Dispute Resolution

Include a termination for convenience clause (e.g., 60 days' notice) and termination for cause (breach, insolvency, change of control).

Also specify:

  • Return of unsold inventory upon termination (at supplier's cost or yours?).
  • Dispute resolution: Negotiation → Mediation → Arbitration (preferable to court litigation for speed and cost). Appoint a mediator through the Australian Disputes Centre or Law Society.
Never agree to supplier's exclusive jurisdiction in another country (e.g., China or India). Australian retailers should insist on courts of New South Wales, Victoria, or the state where your business operates.

Finally, have a commercial solicitor review any supplier agreement before signing. A $2,000 legal review can save $200,000 in a dispute.