Purchase Agreement For Raw Materials

Commodities are the building blocks of any product sold or used in the service industry. Any sector that constantly needs raw materials is usually where raw materials are available at a lower cost. This avoids high fuel and transportation costs and increases profit margins. It is not only the geographical availability of raw materials, but also communication with sellers, which is the turn of the competition. This is where a good agreement on the supply of raw materials comes in. A successful business is one that procures high-quality inputs at a lower price and sells them at a high selling price. Any agreement reached by an organization should aim to preserve its legal status and list the rights created and limit its obligations. A commodity supply contract is essentially a sales agreement within the meaning of the Sale of Goods Act of 1930. It may also be a sales contract under the same law if ownership of the case is transferred immediately – compared to the first, when two parties agree to deliver goods at a future date. In other words, it is a sales contract whereby one party accepts the sale and the other accepts the purchase of certain products of economic value. Rights can be taken immediately or in the future.

There may be two parties, namely the seller and the buyer. It is not necessary for any of them to be admitted. Any entity, including individuals, that are not excluded from the award of contracts under Sec 10 of the Indian Contract Act of 1872 may consent to the supply of raw materials in India. Commodities are the lifeblood of any manufacturing industry. Any sector that includes the sale of materials, including the service industry, requires raw materials; food and beverage industry. Raw materials can take the form of natural resources or semi-products that need to be processed to become a finished product. For example, wheat can be considered a raw material for pizza making, either as it is, refined flour or a finished crust. Then come the terms of the agreement. Here are some of the points that could be included for the creation of an effective agreement on the supply of raw materials: a brief introduction can also be made on the nature of their operations and on the circumstances that led to the agreement. Once the purchase intention of the buyer and seller is highlighted with details about the raw materials, the introductory part of the agreement is concluded. For example, it may be A, a textile company that approached B, a cotton yarn manufacturer, with the intention of two 200 Rs double yarns. Per kg class A for textile manufacturing.

If the nature of your business involves buying or selling raw materials, make sure you are protected from Malafid/party contracts.

Fotos: Kathrin Leisch
Impressum | AGB