What Is a Supply Agreement?

by Jennifer VanBaren; Updated September 26, 2017

A supply agreement is used between a business and a vendor, stating an arrangement made about receiving an ongoing supply of goods or materials. A supply agreement states all details of the future sales.

Purpose

This agreement is used to purchase goods from a vendor. The vendor agrees to continuously supply specific goods to the buyer according to the terms detailed in the agreement. This allows the buyer to receive needed goods or materials without reordering them each week or month.

Details

A supply agreement states the obligations of both parties, the contract date and details regarding how invoices and purchase orders will work. It also states how pricing and quantity of goods are determined throughout the contract.

Benefits

The seller of the goods benefits from a supply agreement by being guaranteed a certain amount of sales each year. The buyer of the goods automatically receives goods needed and therefore saves time by not placing weekly or monthly orders.

About the Author

Jennifer VanBaren started her professional online writing career in 2010. She taught college-level accounting, math and business classes for five years. Her writing highlights include publishing articles about music, business, gardening and home organization. She holds a Bachelor of Science in accounting and finance from St. Joseph's College in Rensselaer, Ind.