A toll manufacturing agreement is a legal document that outlines the terms and conditions governing a manufacturing relationship between two parties: a client (also known as the licensor or owner) and a manufacturer (also known as the toll processor or contract manufacturer). The agreement typically involves the manufacturer producing goods or components using the client’s intellectual property, materials, or specifications, while the client retains ownership of the finished products.
Key Elements of a Toll Manufacturing Agreement
Free Manufacturing Contract Template & FAQs – Rocket Lawyer 1. Parties
Clearly identify the names and addresses of both the client and the manufacturer.
Specify the legal status of each party (e.g., corporation, partnership, sole proprietorship).
2. Scope of Work
Define the specific goods or components to be manufactured.
Provide detailed descriptions, drawings, or specifications.
Outline the manufacturing process and any special requirements.
3. Intellectual Property
Clearly state that the client retains ownership of all intellectual property rights related to the products.
Address the manufacturer’s obligations regarding confidentiality and non-disclosure of the client’s intellectual property.
Consider including provisions for the protection of trade secrets and proprietary information.
4. Materials and Supplies
Specify who will provide the materials and supplies needed for manufacturing.
Outline the ownership and title of materials and supplies during and after the manufacturing process.
Address any costs associated with materials and supplies, including transportation and storage.
5. Manufacturing Process
Describe the manufacturing process in detail, including any quality control measures or testing requirements.
Specify the location of the manufacturing facility and any relevant certifications or approvals.
Address any safety or environmental regulations that must be followed.
6. Quality Control
Establish quality standards and acceptance criteria for the finished products.
Outline the inspection and testing procedures to be followed.
Specify the remedies available to the client in case of non-conforming products.
7. Delivery
Define the delivery terms, including the timeframes, shipping methods, and destination.
Address any shipping costs and responsibilities.
Outline the consequences for late or non-delivery.
8. Payment
Specify the payment terms, including the amount, due date, and payment methods.
Address any discounts, penalties, or interest charges.
Consider including provisions for milestone payments or progress invoices.
9. Warranty
Establish a warranty for the finished products, specifying the duration, coverage, and remedies available to the client.
Consider including provisions for product liability and indemnification.
10. Termination
Outline the circumstances under which either party can terminate the agreement.
Address any notice requirements and consequences of termination.
Specify the disposition of unfinished products, materials, and equipment.
11. Governing Law and Dispute Resolution
Specify the governing law that will apply to the agreement.
Choose a dispute resolution mechanism, such as mediation, arbitration, or litigation.
Design Elements for a Professional Toll Manufacturing Agreement
Clear and Concise Language: Use simple, straightforward language that is easy to understand. Avoid legal jargon and technical terms whenever possible.
Consistent Formatting: Maintain consistent formatting throughout the agreement, using headings, subheadings, and bullet points to improve readability.
Professional Layout: Use a professional layout with clean margins, appropriate font sizes, and a clear hierarchy of information.
Attention to Detail: Pay attention to the small details, such as correct spelling, grammar, and punctuation.
Legal Review: Consult with an attorney to ensure that the agreement is legally sound and protects your interests.
By carefully considering these elements, you can create a professional toll manufacturing agreement that effectively outlines the terms of your manufacturing relationship and provides a solid foundation for your business.
