Does Your Lawyer Understand . . .? Part 1 – Manufacturing

This is the first in a series of articles based on my experiences with lawyers who don’t understand various deals, issues, industries etc., and therefore, don’t adequately represent their clients’ interests.  In this post, I’ll discuss the basics of representing manufacturers.

The most basic issues in representing manufacturers surround supply chain contracts – i.e., contracts where one party manufactures and sells products or components to another party.  Although this seems like a simple context, there are an infinite number of issues that arise.  Here, I’m only going to try and scratch the surface by identifying a few of the most important by asking the following questions:

• Is your client the manufacturer/seller or the buyer?
• Is this a wholesale or retail transaction?
• What is the term of the agreement?
• How can it be terminated (e.g., only for cause, with or without cause, upon material breach, etc.)?
• Is the parties’ relationship exclusive in an industry, product line, territory, or otherwise?
• Is the product (or the process by which it is manufactured or sold) subject to governmental regulation?
• Will the product be exported?  If so, by whom; to whom; and is a license required?
• To whose specifications will the product be manufactured?
• Who decides if changes are necessary?
• How will orders be placed/accepted?  What about lead times, custom orders, etc.?
• Is this a requirements contract (i.e., manufacturer has to meet buyers’ requirements), an output contract (i.e., buyer has to accept manufacturer’s entire output), or something else?  If the latter, what happens if the manufacturer can’t meet the buyer’s demand?
• What are the terms of delivery/risk of loss?
• Whose warranty will govern?
• What are the payment terms?  Prepayment?  COD?  Letter of Credit?  U.S. Dollars?  Etc.
• Who is responsible for taxes, insurance, freight, etc.?
• Who owns (or has license rights to) the intellectual property?  Will any IP be developed during the term?  Will any be jointly developed?
• Can the parties use each others’ names, marks and logos?
• What are the indemnification and insurance obligations of the parties?
• Whose law will govern (especially important in international transactions), and equally important, where and how (e.g., litigation versus arbitration) will disputes be resolved?
• Are there any important restrictive covenants (both during and after the term)?  E.g., confidentiality, non-compete, non-solicitation (of empoyees, customers, etc.), non-disparagement?

These are just some of the questions/issues that your lawyer must ask/understand to adequately represent you if you are a manufacturer – make sure he/she does.

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