Wholesale Agreements Explained
A wholesale contract is a form of agreement between the seller and a wholesale buyer, typically an entity that purchases large amounts of goods at a discounted price for resale to other entities. This process allows the buyer to maintain a profit margin while reselling the purchased goods to retail customers at a higher price. The agreement between the buyer and the seller should include any pricing, delivery, terms, payment methods, return policies, and warranties in order to prevent any disputes before and after the transaction.
creating a wholesale contract involves several elements, including a statement of the parties involved, a description of the subject matter that is being involved in order to clarify what the parties are agreeing to, an offer by one party that the other can accept, consideration from both parties, performance by both parties, and the possibility of dispute resolution. Each of these components makes up the contract , but it is important to note that a contract does not have to be verbal or written in order to be a valid contract. If each party that is involved in the contract accepts an offer from another party, then because both parties have accepted the offer, terms of the contract must be fulfilled. However, if no terms of the contract are fulfilled, the party that made the initial offer can recede the offer.
There are many forms of wholesale contracts including shipping contracts, manufacturing contracts, and retail contracts. Wholesale contracts differ from other ways of purchasing goods that may not include the formalities required of a contract, and will therefore require that each party goes through a detailed process to fulfill the terms of the contract. If the terms of a contract are broken and an agreement is not satisfied, there may be remedies that a wholesaler can pursue. These remedies can range from negotiating an alternative solution to taking action against the parties involved in the contract through a lawsuit.
Essential Elements of a Wholesale Contract
The basic elements of a wholesale contract agreement template include the parties involved, products coming from the agreement, pricing of products, and payment terms. All of these basic aspects are generally covered in a wholesale contract agreement, whether it be in a single paragraph or multiple ones.
The parties involved are simple enough. You need the manufacturer and wholesaler, as well as any other parties to the contract. For example, if the wholesaler intends to drop ship products, they should have the end parties to the contract added in as well. This will vary as there could be a number of parties involved depending on how the distribution structure looks.
The details about the product relate to the project description, type of products or services, and the quantities. Ideally, the project description may also have any relevant statistics about the product to determine how it measures up to competition. The type of product can list several particulars, such as brand names and model numbers. The quantity can be indicated with words (like "enough" or "commercial") or by numbers (such as 10 or more).
The pricing aspect of this is fairly simple in that it can be a decimal number, a string of words or both. Ten dollars ($10) is a simple writing of the number component, and "ten bucks" is a simple writing of the words component. If you wanted to only use words, then you could go for "Ten dollars."
Finally, the payment terms will include such details as the timing of payment, the method of payment, and the location of payment. In most cases, the location of payment is not essential so long as there are clear details about the timing and method of payment. For example, if there is a one-time payment at signing, a monthly bill, or a quarterly payment, those would all be considered timing. The method of payment would describe how it is to be made, such as a bank transfer, direct deposit or other method.
Advantages of a Wholesale Contract Template
The use of a template can save you considerable time by providing you with the exchange terms of the goods you are seeking to sell. A typical wholesale agreement template will include the price per unit, the number of units, shipping details, payment terms, delivery and pick-up terms, and much more. You can greatly reduce the time you would need to search for all of these contract components online if you had a template in which you could just fill out the information that is specific to your transaction.
A wholesale contract template can also reduce the likelihood of making an error or skipping an important step. If you must search the Internet for a contract template, you will likely expend considerable time trying to identify a template that does not contain clauses only useful in other business ventures. Because of this, you may overlook wholesale-specific clauses when going through the rest of the contract drafting process. When using a template, all of the clauses are related to the business of wholesaling. You may be less likely to miss an important clause or context.
A wholesale contract template can also help you ensure that you are meeting certain legal requirements. For example, there are federal and state laws that provide for the protection of the goods being sold by wholesalers. A template will help you make sure that important details of how the goods are protected are included in your contract so that you do not violate these laws.
Tailoring Your Wholesale Contract Template
While a wholesale contract agreement template is a great starting point, it’s important to ensure that the document is deeply customized in accordance with the industry and the products and services being provided. The experiences and expectations of a wholesaler in one industry or for one type of product may not translate 1:1 to another.
For example, an agreement for a grocery wholesaler may include provisions around jurisdiction, such as expenses that must be credited for returned and damaged items, expiration dates, and when a vendor can recoup costs for overstocked items because too many were ordered at one time. A document for a medical wholesaler, on the other hand, may require highly specific language about replacement schedules for products that expire more quickly than 12 months, on the federal Pharmacopeia schedule, and may require more specialized legal review.
Hiring an attorney or a business owner with experience in your field to help you customize an agreement from a wholesale contract template can ensure that all the "i"s get dotted and all the "t"s get crossed on your documentation. Doing the same in your document management software can help you to get your paperwork in order so that you’re prepared to pivot if you end up in litigation.
Common Mistakes to Avoid
Many companies make the mistake of not being specific enough when drafting their wholesale contracts. This can lead to both parties to feel like they had a different understanding going into the arrangement. It’s better to err on the side of caution and put as many specifics into the agreement as you can. If you have any questions about any part of the specifics, be sure to ask for clarification before you sign your name to the document.
It probably goes without saying, but you definitely do not want to be vague about the payment terms in your wholesale contract. This is asking for issues down the line where one party wants their money up front or feels like they are getting shorted in the deal . Be clear about how much is to be paid, when the payment is due, what methods of payment are acceptable and any late fees that the seller may impose if the payment should have been made by a certain date.
Not taking the terms of the wholesale contract seriously is the last of the mistakes to avoid. That means making sure that both parties understand the full range of the agreement, that nothing is left to chance and that everybody involved is agreed upon the terms of the wholesale contract. Be upfront and frank with your business customer about everything in the contract, and remind them that it is to their best interest for them not to assume that anything is going to be okay.
Legal Aspects of Wholesale Contracts
When it comes to wholesale contract agreement templates, there are some legal aspects that every supplier needs to consider. Since wholesale agreements can vary from location to location, it is important to be familiar with the laws and regulations in the areas where the correspondents operate. Some of these include:
- Wholesale Licensing – Some places require wholesale suppliers to have a license to operate as a wholesaler. This may not apply to online retailers but can definitely be the case for storefronts.
- Taxes – No business gets around paying taxes, and wholesalers are no different. For American companies, the choice of business structure can affect how much tax they pay, and whether the IRS has specific forms they need to fill out.
- State Laws – States often have their own regulations when it comes to taxes, business structure, and other wholesale aspects.
- Dispute Resolution – No matter how careful you are when writing the original contract, disputes can arise. A good wholesale agreement contract template will include mediation and arbitration as dispute resolution techniques.
There are additional considerations. For example, in California, suppliers that do not disclose the wholesale price to the resellers can be subject to a fine of up to $2500. In parts of Canada, wholesalers may fall under what is called "Minimum Advertised Price" or MAP restraints, which make it illegal to advertise a product for less than the MAP specified by the supplier.
One caveat here is that these laws and restrictions do not apply everywhere. Thus, it is up to the wholesale distributors to check for the relevant laws and consult with a legal expert.
Where to Find Wholesale Contract Templates
There are numerous resources available for businesses seeking reliable, quality wholesale agreement templates.
Online search engines allow businesses to search for websites that have free or paid templates suited to their particular industry or trade sector. There are already numerous crowdfunded legal tech companies that provide free and paid templates for various kinds of documents, including contracts ranging from simple to complex. In some cases, there are templates that are useful to all types of businesses.
Legal websites that provide free or paid templates are also available , as are template services from organizations such as the American Bar Association and the Chamber of Commerce. Typically, it is a good idea to use templates that are legally compliant with federal, state and local laws.
Professional legal service websites that offer free legal advice online for a set monthly or annual fee as well as templates and legal documents worth thousands of dollars are also an option for small businesses. These service providers typically provide templates in an easy-to-download PDF format. Legal document service providers may also help with document signing via electronic signature and notarization.