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Manufacturing Services Agreement - Subcontracting by Consignment


This Manufacturing Service Agreement is drafted for a Manufacturer to provide manufacturing services to a Client on a subcontracting basis through consignment to conform to the Manufacturer's requirements. This is drafted as a service rather than the sale and purchase of products. This agreement is drafted in favour of the Manufacturer.

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Document Description

The Manufacturing Services Agreement - Subcontracting by Consignment is a document that outlines the terms and conditions for the provision of contract manufacturing services by the manufacturer to the client. The agreement highlights the importance of the document in establishing a clear understanding between the parties involved.


The entire document is divided into several sections, each addressing specific aspects of the agreement. The first section provides definitions for key terms used throughout the document, ensuring clarity and understanding. The background section explains the purpose of the agreement, stating that the manufacturer provides contract manufacturing services for clients, and the client wishes to engage the manufacturer to produce products designed and developed by the client.


The services section outlines the scope of the services to be provided by the manufacturer. It specifies that the services will consist of assembling or processing the consigned materials to manufacture the products and ensuring that the finished products meet the client's specific requirements. The manufacturer is also responsible for providing a fully equipped facility and trained employees to perform the services.


The pricing and payment terms section states that the client agrees to pay the manufacturer the mutually agreed price for the services. It also explains the process for revising product pricing and the payment terms for non-recurrence expenses and purchase orders.


The purchase of materials and liabilities section outlines the client's responsibility for providing a rolling order forecast and the manufacturer's obligation to fulfill additional purchase requests. It also addresses the handling and storage of consigned materials and the manufacturer's quarterly stock checks.


The quality section emphasizes the manufacturer's responsibility for maintaining an appropriate quality system for the products and complying with ISO certification. It also allows for inspections and audits by the client.


The delivery terms section specifies the delivery terms for the products and the manufacturer's responsibility for delivering products within the agreed lead time.


The intellectual property rights section grants the manufacturer a non-exclusive license to use the client's background intellectual property for the purpose of designing and developing the product. It also addresses the ownership and disclosure of intellectual property.


The confidentiality section highlights the parties' obligations to keep the terms of the agreement and any confidential information confidential. It also specifies exceptions to the confidentiality obligations.


The agreement also includes sections on materials on consignment, equipment on consignment, limitation on liability, indemnity and insurance, termination, assignment and sub-contracting, patent and copyright claim, amendments, notices, settlement of disputes, force majeure, counterparts, and no rights for third parties.


Overall, this Manufacturing Services Agreement - Subcontracting by Consignment is a comprehensive document that covers all aspects of the agreement between the manufacturer and the client, ensuring clarity, protection of intellectual property, and compliance with quality standards.

How to use this document?

To use the Manufacturing Services Agreement - Subcontracting by Consignment document, follow these steps:


1. Review the entire document to understand the terms and conditions of the agreement.

2. Ensure that both parties are identified correctly in the agreement, including their principal place of business.

3. Specify the agreed price and completion date for the work to be carried out by the manufacturer.

4. Clearly describe the type(s) of services to be provided by the manufacturer and ensure that both parties are aware of the scope of work.

5. Agree on the length of warranty and time of payment after the completion of the work.

6. Specify the amount of damages per week that the customer is entitled to if the work is not completed by the completion date.

7. Provide a detailed list of non-recurrence expenses that will be borne by the client.

8. Detail the required nre for each product and obtain written approval from the client before executing nres.

9. Specify the payment terms for production tooling and test equipment.

10. Ensure that product payment terms are agreed upon and made upfront before the commencement of production.

11. Use purchase orders to specify the quantity, price, place of delivery, and delivery date for each product ordered.

12. Maintain a rolling order forecast of at least six months for the products.

13. Provide a detailed materials inventory report on a monthly basis.

14. Keep consigned materials in a singular location and clearly mark them as owned by the client.

15. Store consigned materials according to the provided instructions to prevent damage.

16. Submit a monthly report on the balance of consigned materials in the manufacturer's possession.

17. Deplete consigned materials before purchasing from other sources.

18. Conduct quarterly stock checks on any consigned parts.

19. Set up and maintain an appropriate quality system for the products.

20. Maintain ISO certification and comply with quality standards.

21. Allow the client to perform inspections and audits.

22. Deliver products within the agreed lead time.

23. Obtain a non-exclusive license from the client to use their background intellectual property for designing and developing the product.

24. Keep all terms of the agreement and any confidential information confidential.

25. Comply with the obligations regarding materials and equipment on consignment.

26. Limit liability and indemnify the manufacturer for any losses or damages.

27. Terminate the agreement by providing written notice if either party defaults in the performance of their obligations.

28. Maintain comprehensive insurance policies for the performance of obligations.

29. Comply with the provisions regarding termination, assignment, and sub-contracting.

30. Notify the other party of any actual or potential infringement of intellectual property rights.

31. Provide written evidence of insurance upon request.

32. Comply with the provisions regarding notices and language.

33. Seek amicable settlement of any disputes and resort to dispute resolution if necessary.

34. Comply with the provisions regarding force majeure.

35. Execute the agreement in counterparts.

36. Understand that the agreement does not grant any rights to third parties.


By following these steps, both the manufacturer and the client can effectively use the Manufacturing Services Agreement - Subcontracting by Consignment document and ensure compliance with the terms and conditions outlined in the agreement.

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