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Supply Agreement is not a Contract

August 13 2010

A supply agreement is different than a supply contract. A contract between two parties is a formal document that is agreed to and then signed make both parties legally binding to what is written, an agreement is not in most cases.

For many in the business world the supply agreement is in reference to an understanding between two parties when dealing with a service that is to be provided. The term supply contract is used when there is an understanding that one company will supply another with a product.

While both terms are sometimes referred to as interchangeable by many parties, the term contract is more formal. What is understood is that all contracts start with an agreement, not all agreements end up being a legally binding contract.

In many cases a supply agreement is between two parties are made on the phone or with a handshake. While not legally binding, most of the time these are observed as a contract would be. The reason being is a company is only as good as its reputation. The best advertisement is word of mouth from customer to customer. If a company is known for not keeping its word on an agreement then it will lose business.

An agreement to supply one company with a service or product is made because there are two willing parties desiring to conduct business with each other. If any business becomes known for not holding up their end of an agreement they will lose credibility in the business community. Unfortunately for the business relying on an agreement that does not receive what they need, they have no legal recourse to take for any compensation of damages that occur as the result of the broken agreement.

If you have decided on going into a supply agreement that is signed by both parties, then in legal terms it is a contract. This will have all the necessary binding rights of a contract even if it is called an agreement.