Manufacturers and consumer product companies constitute an ecosystem. For this reason, the relationship between the two are essential. It becomes important to consider certain legal elements when structuring a manufacturing agreement as every commercial agreement is customizable to the business relationship. It is also important to recognize what legal frameworks apply to the manufacturing agreement. This may include:
Intellectual property
Safety standards
Regulatory standards
Trade law
Contract Law
In Canada, the relationship between manufacturers and consumer product in commercial transactions are governed by contract law. This is because most agreements between parties are made to establish a business relationship where a manufacturer will supply goods and/or services to the consumer. An example would be fashion retailers, such as Aritzia. Aritzia is a women's clothing store that does not manufacture their own clothing. They have retained a manufacturer, several manufacturers actually, to supply clothing to be sold under the Aritzia brand. An agreement between two parties have been established that include provisions specifying exclusivity rights to the Aritzia brand itself, the limitations on the exclusivity, and certain obligations that are associate with marketing the sale of certain products under the Aritzia brand. In other words, a contractual agreement.
Negotiating the Manufacturing Agreement
There are a lot of important issues that need to be outlined in the contract to ensure that the business relationship between the parties remains mutually advantageous. Some of these contractual elements are:
1. Intellectual Property
Who owns the rights to the intellectual property? What about derivative intellectual property that may be created as the designs evolve and are improved? For example, Babaton is a brand that supplies its product exclusively to Aritzia. There are certain measures to be taken during this transaction to ensure Babaton's intellectual property rights are protected when being marketed and sold by Aritzia.
2. Determining the Parties
Who is manufacturing the goods? Is it the manufacturer that is a party to the contract? Are they sourcing out part of the manufacturing to sub-manufacturers? Should those entities be bound by the terms as well?
3. Purchase Orders and Deliverables
If a purchase order is issued is it deemed to be accepted by the manufacturer? What is the process for acceptance? What is the turn around deliverable time? What happens if the products are not delivered in time? All of these issues should be ironed out in a contract agreement, ideally written.
4. Shipment
Who is responsible for the products during shipment and happens if the products are damaged during shipment?
5. Pricing and Invoicing
Have the prices been set? How is invoicing dealt with? What are the payment terms? What happens if there is a dispute with regards to payment of the invoice because of non-confirming products?
6. Term and Termination
How long is the agreement for? Who can terminate and why? What happens if the agreement terminates?
Import and Export
The importation of Fashion goods should be in compliance with Canada’s Consumer Packaging and Labelling Act and Regulations (CPLA). The CPLA does not permit the importation of products that have been prepackaged and have not complied with the labelling requirements outlined in the regulations. The types of fashion goods that are subject to compliance with the CPLA are:
Cosmetics
Fashion accessories
Non-textile goods
Corporate Social Responsibility and Due Diligence
Every company has (or should have) a moral obligation to practice corporate social responsibility. It is a company's commitment to manage social, environmental and economic effects of its operations in the expectations of the public. A lot of companies adopt certifications to reflect their commitment to practice CSR. By adopting such practices, your company's sustainability reporting is a reflection of your company's due diligence. It is a method to consider when the need to inform shareholders about the company's social, economic and environment performance is doing.
Certified B Corporation
What is this type of certification?
Manufacturers and consumer product companies constitute an ecosystem. For this reason, the relationship between the two are essential. It becomes important to consider certain legal elements when structuring a manufacturing agreement as every commercial agreement is customizable to the business relationship. It is also important to recognize what legal frameworks apply to the manufacturing agreement. This may include:
Intellectual property
Safety standards
Regulatory standards
Trade law