Manufacturing Contracts 101 with Foster Garvey

Introduction

Today we’re adding a fantastic resource for those interested in co-manufacturing contracts. Join host Daniel Scharff as he chats with attorneys Hilary Hughes and Erica Johnson from Foster Garvey about the ins and outs of these critical agreements.

• Hilary and Erica explain how co-manufacturing contracts are often the first formal agreement for brands, playing a key role in their business success.
• They discuss important terms that can influence the effectiveness of a partnership, such as specifications, pricing structures, and distribution rights.
• The experts highlight the significance of thorough due diligence to ensure brands partner with reliable co-manufacturers, potentially avoiding future disputes.
• Listeners can expect practical insights on how to formulate effective agreements to secure quality manufacturing and reduce risks.
• With co-manufacturers being integral to food and beverage brands, setting clear expectations in contracts is crucial for operational success.

Key Components of Co-Manufacturing Agreements

When entering co-manufacturing contracts, knowing the key components can make all the difference. Hilary and Erica break down the specifics that brands need to pay attention to.

• Brands should clarify raw material sourcing and responsibilities to avoid confusion on who manages procurement.
• There are different pricing structures to choose from, primarily Turnkey, where manufacturers purchase all materials, and Tolling, where brands supply their materials and pay for processing.
• Quality control is emphasized, with a focus on rigorous specifications that highlight product characteristics to prevent quality issues.
• Every contract should have clear guidelines for inspections, agreeing on how defects will be handled post-acceptance.
• Establishing audits and certifications is recommended to ensure compliance with safety and quality standards.

Managing Risks and Liabilities

Hilary and Erica discuss how to protect brands from liabilities and manage risks within co-manufacturing relationships.

• Negotiating liability limitations is important, as they can help safeguard against significant potential losses in case of issues.
• Transparency is key; ensure that both parties have the right to inspect materials upon delivery, reducing finger-pointing in disputes.
• Force majeure clauses protect against unforeseen events that could impact the ability to fulfill contracts, outlining procedures for such occurrences.
• Brands should secure rights to assign contracts in the event of an acquisition to avoid losing essential manufacturing partners.
• Having a plan for intellectual property ownership is crucial, ensuring that brands maintain control over their recipes and processes.

Key Takeaways

• The execution of clear co-manufacturing contracts is vital for the success of brands, especially those new to the space.
• Navigating pricing models and ensuring proper specifications can alleviate many common pitfalls.
• Due diligence is a must to foster solid partnerships with manufacturers that meet quality and safety standards.
• Contractual agreements should protect brands from risks and liabilities while clarifying responsibilities to prevent disputes.
• Listeners are encouraged to reach out for personalized assistance in creating or reviewing their co-manufacturing contracts.