Key Questions to Ask Before Entering into a Manufacturing Agreement

Here are some key questions to consider:

1. References and Past Performance

• What is your experience, and how long have you been operating in this industry?
• Can the manufacturer provide references from previous clients?
• What is their track record in terms of meeting deadlines and quality standards

2. Pricing and Payment Terms

• What is the pricing structure for the manufacturing services?
• Are there any hidden costs?
• Are there any volume discounts or bulk order incentives?
• What are the payment terms and schedule?

3. Quality Control and Standards:

• What Quality Assurance (QA) or Quality Control (QC) systems do you have in place?
• Are there specific quality standards or certifications that need to be met?
• How will product defects and deviations from specifications be handled?
• Are there any regulatory or compliance requirements that need to be met?
• Who is responsible for ensuring compliance?

4. Do you own your machinery and factory, or do you outsource the work?

5. Production Capacity and Lead Times

• What is your production capacity?
• What are your estimated lead times for production and delivery?
• Can you walk us through your process?
• How will production delays be addressed

6. Intellectual Property Rights

• Who owns the intellectual property rights for the product?
• Are there any licensing or royalty arrangements?

7. Confidentiality and Non-Disclosure.

• What measures are in place to protect confidential information?
• Do you have non-disclosure agreement (NDA)?

8. Environmental and sustainability practices

• Can you provide information about your environmental and sustainability practices?
• What is your contingency plan in case of unexpected disruptions (e.g., supply chain issues, natural disasters)?

9. Order Quantities.

• Are there minimum or maximum order requirements?

10. Cancellation and Termination

• What are the terms for cancelling or terminating the agreement?
• Are there any penalties for early termination, for both parties?

11. Shipping and Delivery.

• Who is responsible for shipping and logistics?
• What are the shipping terms (e.g., FOB, CIF)?

12. Warranty and Returns

• What is the warranty policy for the manufactured products?
• How are returns and defective products handled?

13. Insurance

• What insurance coverage does each party have, and who is responsible for what?

14. Dispute Resolution

• How will disputes between the parties be resolved (mediation, arbitration, litigation)?
• Is there a jurisdiction specified for legal matters? 

15. Communication and Reporting

• What is the communication protocol between the parties?
• How often will progress reports be provided?

16. Change Orders:

• How will changes to the product or production process be managed?
• What is the process for approving change orders?

17. Insurance and Liability

These questions serve as a launchpad for manufacturing agreement discussions. Carefully document the answers and negotiate terms to protect both parties. Consult legal and industry experts for a comprehensive, legally sound agreement.

*Liability is a big one. Manufacturers may attempt to shift liability away from themselves. Ensure clarity on responsibility for defects, damages, or other issues.

• How do you handle liability issues in our partnership?
• Force Majeure: What happens if unforeseen events or circumstances (force majeure) affect production?

18. Exit Strategy

• What is the plan for transitioning production to another manufacturer if necessary?