Supplier Agreements – Do I Need A Written Agreement?

Supplier Agreements – Do I Need A Written Agreement?


In many cases the root of disputes can be traced back to misaligned expectations. In other words, a supplier understands a customer’s needs or requirements in a specific way and the customer understands it differently.

To a large extent this can easily be prevented where agreements are clearly and professionally recorded in writing. In addition, there are a number of advantages to this approach.

Related: What You And Your Business Need To Know About BBBEE And Black Ownership

The advantages of executing written supplier agreements:

1. It can prevent disputes

Agreements reduced to writing and drafted in sufficient detail by a professional, can aid in preventing disputes because of the clarity it provides. Naturally, the content will depend on the situation and industry involved, however the below serves as a rule of thumb when considering an agreement.

Ensure that the agreement clearly outlines the following aspects:

Sasfin banner 2 embed

  • The customer’s requirements and the supplier’s ability to deliver on those
  • Detailed specifics of the goods or services to be supplied,
  • Deadlines for supply or delivery dates of the goods or service
  • Obligations of both parties (what is expected of both parties)
  • A comprehensive price (including VAT and any administrative charges) to avoid any account related surprises
  • Detail on a returns or refund policy in case the customer is dissatisfied and recourse in case of dissatisfaction (ensure this is practical and cost effective for both parties)
  • The agreement must be Consumer Protection Act compliant where the Act applies.

2. It provides clarity

As they say, the devil is in the detail, so customers should ensure that they are fully aware of what they will be paying for, when they will receive it and what they can do if it does not meet their requirements.

In addition, this is also useful to the supplier. As the supplier is fully aware of what is expected of him / her or it.

This clarity and transparency between the parties can in itself be a very powerful tool, not only to prevent disputes, but also to align expectations from the outset of a transaction and aid in customer satisfaction and even repeat business.

So, it can be a tool to grow business!

Related: The Correlation Between Cash Flow Challenges And Risk

3. It is a powerful cash flow tool

In addition to providing clarity regarding the product or service to be obtained, these agreements are useful for both supplier and consumer to plan their finances.

From the supplier’s perspective, it can limit the risk of not receiving payments on delivery by contracting around payment terms. This can take the form of payment in tranches, by credit card or by deposit on placing order.

For the consumer, also a risk aversion strategy – to pay along terms where you have received what you have contracted for.

It is therefore crucial that these provisions are mutually acceptable to both parties.

Nicolene Schoeman-Louw
Nicolene Schoeman – Louw is an admitted attorney of the High Court of South Africa, as well as being a Conveyancer, Notary Public and Mediator. She is the Managing Director of Schoemanlaw Inc Attorneys, Conveyancers and Notaries Public (Schoemanlaw Inc Attorneys) in Cape Town. Visit for more information or email

Most Read