framework agreement

A framework agreement is a contract that sets up the basic legal relationship between parties that have an ongoing relationship, such as that of product supplier and customer, or service provider and customer.

The efficacy of such agreements is in the provision for the ordering mechanisms, standard terms of supply, forecasts of orders for extended periods of time. As such they facilitate an ongoing supply relationship and are usually representative of stable commercial relationships and good faith between the contracting parties.

The benefits for the supplier include the ability to conduct forward planning for manufacturing or other resourcing requirements, and for the customer, a stable and reliable supply chain.

Usage: The framework agreement required the customer to deliver of rolling forecasts of expected supply requirements each quarter.

Related Words: contract; distribution agreement; teaming agreement; agency agreement; choice of law clause; jurisdiction clause; option agreement.