What Is A Wholesale Purchase Agreement?
Wholesale purchase agreement contracts are a type of business contract that is used by companies and corporations within the wholesale industry that sell products to other businesses who in turn sell these same products. It differs from items such as a standard purchase order, bill of sale, or invoice because it could cover a wide range of products for purchase, delivery steps, and special requirements for any shipments if necessary . It also will have a set of terms and conditions, but these are often broad in context and scope. Such an agreement is only binding once signed by both companies involved, but it provides both with the assurance of the scope of the transaction being entered into. It ensures that all sales are legally binding and that both parties agree to the set terms and conditions. Any company that is part of this type of industry frequently does use this type of contract.
Parts Of A Wholesale Purchase Agreement
Wholesale purchase agreement contracts typically contain several key components, such as the parties to the agreement, terms of sale, delivery conditions and payment terms. The essential parts of such a contract are outlined below.
Parties:
The contract should clearly state the names of the seller and purchaser. It should also include the name of the manufacturer if they are not the seller.
Terms of Sale:
The terms of sale should include a description of the product(s) being sold, quantity of the product(s), price per unit or per set, the total price for the order, location of the manufacturer of the products and applicable state law, if any.
Delivery Conditions:
The delivery conditions should include who is responsible for shipping the product(s), when the contract is due for completion, whether additional time can be given to complete the contract and under what conditions, whether a product can be returned and whether the manufacturer is responsible for paying tax on the sale.
Payment Terms:
There are several aspects of the payment terms that should be included in a wholesale purchase agreement contract. These include the method of payment (e.g. check, PayPal, 90 percent due on order completion with balance due on receipt of products, etc.), whether a contract extension will be given to pay the entire balance and the consequences for not paying on time.
Why A Wholesale Purchase Agreement Is Necessary
The importance of having a written wholesale purchase agreement with your seller or buyer is critical. Both parties to the transaction are protected by the agreement, which covers their interests in the property, seller’s disclosures, earnest money deposits and terms of how the transaction will be paid for. Having the agreement allows for the buyer to know what his/her obligations are to the seller and vice versa and specifically sets out each parties’ responsibilities.
If the agreement is not followed and disclosed issues arise between the buyer and seller, the agreement will act as a roadmap for resolving any disputes that occur.
How To Draft A Wholesale Purchase Agreement
The first step in creating the wholesale purchase agreement is for the wholesaler (the seller) to determine the terms that he/she would like to have on the purchase agreement. It is important for the wholesaler to consider price ranges and best/worst case scenarios for potential deal. The next step in creating the purchase agreement is the actual negotiation of the terms between the wholesaler and his buyer. Once the buyer has responded to the wholesaler with a proposed deal, the wholesaler must then negotiate the terms with them in order to achieve an accepted deal with the buyer. The final step for the wholesaler in creating the wholesale purchase agreement is to ensure that the agreement is in compliance with all relevant laws, such as landlord/tenant ordinances, building codes, zoning codes etc… The wholesaler could choose to have an attorney create the agreement for him/her or have an attorney look over the purchase agreement in order to determine if any revisions should be made.
Common Errors In Wholesale Agreements
Some companies might think there is no need for a written contract or that using the same contract for different wholesale deals is alright. Others might use a contract as a template without checking that the provisions are up to date or relevant to the current transaction. Still others might mistakenly believe that changing a few words here and there makes a wholesale contract, which could be decades old, valid.
Each of these types of mistakes is likely to come back to haunt the company that failed to use a carefully crafted wholesale purchase agreement. Here are a few examples of what can go wrong without a quality wholesale contract in place:
• A buyer fails to deliver consignments on time, causing severe disruption of the seller’s inventory management system and damaging the seller’s relationships with its other customers.
• A seller uses a buyer’s trademark on a product, causing the buyer to withhold final payment for the order while it explores recounting its inventory .
• One party wrongly claims that the seller failed to make timely delivery of raw materials and refuses to pay the final invoice.
• A buyer fails to make payment for a shipment and takes the product for resale, but the seller has no way to blame the buyer for accepting an incomplete or unwanted shipment of goods.
A wholesale purchase contract can help protect your business against all of the situations listed above — and many others. If you are already using a contract template without much thought to its content, consider taking a more serious look at your agreement and see whether you can tighten certain language and revise the document to suit your business needs more accurately. However, if you have a generalized wholesale purchase contract that is years old, take time to review the provisions and compare them to recent wholesale purchase contracts to see how they have been updated, and then update your template accordingly.
Getting Wholesale Agreements PDFs Online And How To Edit Them
The internet is rife with free downloadable wholesale purchase agreement PDFs, but make sure you are not accessing scams or EU style agreements. For example, there is a free download at Legalzoom, but inevitably they will try to sell you something, and the document itself is more tailored for deal-sourcing in the EU, as opposed to making local California buys right now.
The way we customize these is by first doing a "search and destroy" on the PDF document, meaning we open it, and if there is any identifying information like a name, business name or address, we take a redline marker and scratch it out before we save it as our own original, blank document. We then go through the "find" function of Adobe and remove every word that does not have to do with the particulars of our buyer’s deal. When we get it down to a half a page of the necessary facts, we rebuild it with whatever customization may be required for our buyer, and produce a new PDF.
It is highly important that all of the identifying information of the parties who perform the wholesale transaction is completely redacted from the agreement so that the deal can close cleanly.
Then in the agreement, we adjustment all of the actual language to meet the particular facts of the deal. If there is a deed included, we make sure that we have included enough paragraphs in the description so that we can include any referenc, deed or refund requirements necessary to close the deal.
It seems tedious at first, however, once you get a good system down, it goes pretty fast after the second or third time you do it, and you are saving thousands of dollars.
Legal Issues Related To Wholesale Agreements
When entering into contracts to purchase from wholesalers, it is critical to consider legal ramifications of those agreements. First, under the Uniform Commercial Code, which governs sales contracts and the sale of goods, there are default provisions such as implied warranties, defenses against non-performance and evidence of a breach, which will override the agreement if not explicitly disclaimed or modified in the agreement. Second, state regulatory laws or ordinances may impose additional requirements regarding such purchases, such as restrictions on the resale of products obtained through such purchases. Third, courts have developed a common law that governs the resolution of controversies.
In regard to UCC provisions that require modifications: Many wholesalers may supply goods that are subject to such implied warranties. In order to disclaim them, the agreement must include "conspicuous" language modified from Uniform Commercial Code section 2-316(2), which provides: "(2) To excluded or modify the warranty [provided in the first sentence] a writing must be conspicuous and must state, for example, ‘There are no warranties which extend beyond the description on the face hereof.’" Such language may be placed in a separate paragraph or alongside of another term. There is no requirement for the disclaimer to be highlighted, bolded, capitalized in all caps, or placed in all caps. The following constitutes a conspicuous disclaimer: In regard to state regulatory concerns: Each state has its own laws and ordinances and should be reviewed with counsel before any wholesale purchase agreement is finalized and signed. For example, if the products are going to be resold at retail in the state implemented in the transaction, whether the purchase would be lawful under the states regulatory scheme for things such as price, packaging, labeling, ingredients, and other such criteria. In regard to the resolution of controversies: The agreement must provide a negotiated process for resolving disputes that is final and not reviewable by any administrative or judicial authority, unless otherwise agreed by the parties.
Frequently Asked Questions for Wholesale Purchase Agreements
Below you will find commonly asked questions answered. If you don’t see the answer to your question, please post in the comments and I’ll add it to the list.
What is a wholesale purchase agreement?
A wholesale purchase agreement is a contract between a wholesaler (or seller) and a buyer that allows the buyer to purchase products at a set price, the wholesaler purchases the products at that price, and the buyer can then sell the products for a profit. This is typically a wholesale to retail market, but not always.
Why use a contract?
Having a contract ensures that the parties are both on the same page as to what the expectations are and if there is a breach , the parties can turn to the contract to remedy the breach.
What happens if I find a better price?
A wholesale purchase agreement does not typically restrict prices from being changed. Instead, the purchases and sales contracts would regulate pricing.
What if I still want to buy the product after the contract expires?
Some wholesale purchase agreements may have an evergreen clause. If you have a fixed term contract, you are free to enter into a new contract with the wholesaler after the contract has expired (subject to any clause in the agreement prohibiting it).
What if the wholesaler increases the price?
The wholesale purchase agreement is a contract, and contracts are subject to renegotiation. The parties are free to negotiate the terms of the contract and make changes as they see fit.