Brief Introduction About Master Purchase Agreement
A Master Purchase Agreement is required in case of sale and purchase of goods and services. The aforesaid Agreement provides advantages to both sellers as well as purchasers.
What Is a Master Purchase Agreement?
This Agreement can be defined as a legal document signed by the Buyer or designated Buyer or Purchaser with the Seller or designated Seller for the purpose of trading of goods and/or services. This Agreement has to own benefit with regard to the sale and purchase of goods in an effective way.
This agreement is often confused with a Master Agreement. What is a Master Agreement? It simple words, it is an agreement between a trade union and employer(s) and frames local negotiations.
Who Takes the Master Purchase Agreement?
This agreement is made between a buyer and seller for the smooth supply of products and services. Both the Buyer or the Purchaser and seller get involved in this Agreement. It works as an aid for the credit and risk management for both the parties involved.
What Is the Purpose of the Master Purchase Agreement?
This agreement is made to reduce disputes between the parties involved in the Agreement. It provides the relevant terms and conditions of the Agreement. The main purpose of this document is that it helps to maintain credit and ensure risk management for the seller as well as the Buyer.
Contents of the Master Purchase Agreement
The following are some of the basic elements for the contents;
- Name and address of the parties involved
- Definitions of the legal terms: the definitions of legal terms mentioned in the documents have to be provided
- Prices, Volume Adjustment: The details of the pricing structure and volume of adjustment if any required
- Delivery, Acceptance: The schedule of delivery and acceptance has to be mentioned
- Rescheduling and Cancellation, Modification of Orders, Shipping Arrangements, Return Policy, Payments, and Taxes. The details of aforesaid things have to be mentioned.
A master purchase agreement template sets forth these terms.
How to Draft the Master Purchase Agreement?
The following are the steps involved while drafting an agreement;
- Confidentiality: Both parties will have to agree that they will not share the secret of the business with any third party.
- Delivery requirements: A proper delivery schedule has to be maintained as per the requirement.
- Dispute Resolution: In case of any dispute, an outline has to be mentioned to resolve the conflicts of the parties.
- Geographic locations: both the parties agree that the location of employees working for the business, i.e., place of business.
- Intellectual property rights: The parties much decide how to handle ownership and regulation of all patents and other IPs. The client gets all the IP in some instances. In others, the vendor provides perpetual rights while keeping his or her IP and patents.
- Limitations of liability: The Agreement will also mention the responsible party for the liabilities arises.
While drafting a master purchasing agreement or a master sales agreement you can mention these clauses and clear commitments right at the onset.
The negotiation process in such agreements becomes very complicated and burdensome. However, for a good negotiation process, both parties also can hire an attorney who can act as a mediator for a smooth negotiation process. The simplest way to negotiate is deciding among themselves on how to proceed with the contract without any expenses and loss of time.
Benefits and Drawbacks of Master Purchase Agreement
This agreement helps to reduce between the parties involved in the Agreement. It helps to reduce future disputes between the Buyer and seller by providing relevant terms and conditions of the Agreement. Lastly, it works as an aid for the credit and risk management for both the Buyer as well as the seller.
The preparation of an agreement is quite a time consuming and lengthy. The negotiation process in such agreements becomes very complicated and burdensome. However, once the agreement is made, the legal formalities required for the future transactions that will be made between the parties can be reduced, and for this, it requires a brief confirmation from both the parties in terms of the material transaction.
[ Also Read: Purchase Agreement]
What Happens in Case of Violation?
The breach of legal contracts has its own consequences, which clearly depend on the current situations and scenarios. The violations of an agreement depending on the terms and conditions mentioned in the Agreement and remedies available for the same. However, if one party breaches the Agreement, the other party can sue the breaching party and also can claim compensation for the damages in the court of law.
A legally enforceable agreement is an essential part of doing any sort of business contract. Similarly, the agreement governs the supply by the Purchaser and/or any designated purchasers to the relevant Sellers of certain products and services.
Sample for Master Purchase Agreement
A sample of the agreement can be downloaded from below.
