When negotiating a co-packing contract, liability and indemnification clauses can become a very controversial issue, as a lot of money can be at stake for both parties. The customer generally demands that he is not responsible for liabilities arising from acts or omissions of the co-packer in connection with the co-packaging service. The agreement must also list the customer`s obligations. For example, that the customer creates a monthly turnover forecast for the quantities to be produced, or that all products delivered to the co-packaging facility are properly labeled and packaged, or that the customer is responsible for ensuring that the products comply with all applicable safety and labelling laws and regulations, or that the customer negotiates with the control authorities regarding product safety and possible product recalls. A co-packaging service contract should define the terms, obligations and requirements for both parties, as well as co-packaging services and performance levels. However, an agreement should not be too detailed or rigid, especially for a fast-growing company, otherwise the agreement can exacerbate the very problems it is designed to prevent. The fundamental strengths of a food company are its trade secrets, logistics, sources of supply, quality assurance, food safety practices and professional risk management. All these bases are strongly involved in a thorough consultation of the co-packer agreements. The agreement must specify how often the co-packer charges for services, when an invoice is to be paid and how payment is to be made. As for the law, in most cases, the manufacturer is legally responsible for all the risks associated with a product, even if the co-packer played a role in the cause of these risks, so you need to make sure that your agreement is watertight and explicit. Here are some areas that should be covered in a co-packaging service contract (in alphabetical order): • Intellectual property – A good non-disclosure agreement can adequately protect your trade secrets at the beginning of the relationship.

Before manufacture, it is not uncommon for product formulas to be modified to meet the equipment and personnel of the copacker. Formula changes can be “assigned” to the marketer in a Copacker agreement if they are minor. If the formula changes are more substantial, it may be advisable to enter into a product development agreement before the Copacker agreement. Non-compete obligations or non-circumvention clauses may complement these agreements to further protect the marketer from commercial interference. The agreement must specify which laws govern the agreement (i.e. by which state or country). The parties may mutually agree on the law of a State, which need not be the State in which one of the parties is registered or doing business. However, in the event of a dispute, the “choice of law” may be challenged by the court, as it usually seeks links between the agreed state and the transaction or parties. The packaging contractual agreement is the legal agreement between the manufacturer and the packaging company. No matter what discussions have taken place before – if the work is not listed in the contract, you have no way to make sure it happens. The court defines where a dispute is resolved.

In an agreement, the applicable law may differ from jurisdiction; For example, the applicable law could be Delaware, but the parties agree that all disputes will be resolved under the jurisdiction of the San Francisco court. The Customer may request the Co-Packer to purchase and maintain adequate and appropriate insurance that provides coverage against potential risks associated with the Contract. These and other risks are briefly discussed in our nifty copacking infographic. Please read on to learn more about our comprehensive risk management thinking. There are several ways in which co-packers charge a fee for services. This can be a fixed price per unit (based on volume), a time-based package (hourly, weekly, monthly) or a combination of fixed and variable fees. The agreement must reflect the price structure best suited to the type of service provided and the products packaged. It is always good to have a clause in the agreement that defines when fees can be adjusted (e.B.

once a year) and what can trigger a price increase (e.B. minimum wage increase, inflation or increase in the cost of raw materials). It is important that the parties (customer and co-packer) are properly defined in the contract. This includes an indication of the state of incorporation and country of incorporation as well as the type of companies (e.g. B, limited liability company or partnership). In addition, the agreement should specify which party is responsible for expenses related to additional services, storage. B additional, to the rental of pallets, urgent orders, waste treatment and receipt of products. Another reason for a customer to terminate a contract prematurely is if the co-packer does not achieve an agreed level of performance for a defined period of time or does not take appropriate corrective action.

A product recall caused by acts or omissions of the co-packer may be another reason for early termination. It is recommended to define the specifications and instructions of the product in the co-packaging agreement. Specifications should include information on design, packaging and labelling instructions, a complete list of bills of materials (BOMs), and the configuration of crates and pallets. The information may be specified in data sheets and attached to the agreement as an exhibition. Marketers need to share their product formula with their co-packer, so co-packager agreements are a kind of intellectual property license. The way a formula is shared with a co-packer is indicative of a company`s discipline with its trade secrets. Start negotiations with a large NDA that requires the constant confidentiality of trade secrets. When concluding the co-packaging agreement, any changes must be attributed to the distributor forever. The above list is not exhaustive and contains only the most important contractual conditions. Depending on the complexity, scope and scope of the co-packaging services to be provided, additional conditions may need to be added. During the initiation of a business relationship, both parties may be exposed to certain non-public confidential information such as sales figures, technical data, product specifications, business plans and financial data. The terms of the agreement must stipulate that confidential information must not be used or disclosed to third parties unless otherwise agreed.

Trust in an outsourcing relationship is essential, but a well-designed co-packaging or co-manufacturing service contract can help reduce risk and define obligations and requirements for both parties. Perhaps the most important part of a co-packaging agreement is the description of the services provided by the co-packer. The scope of work should be defined as clearly and concretely as possible. .