This contract manufacturing agreement template is typically used in an intercompany transaction between a principal and manufacturer. The manufacturer undertakes the typical operational functions required to manufacture the products. This may include, but is not limited to, the procurement function, day-to-day manufacturing operations and quality control.

The manufacturer does not undertake entrepreneurial activities which would result in risk-bearing or intangible asset development. The manufacturer often utilises production technology, product specifications, quality assurance and quality control procedures made available by the principal.

In terms of risks, the manufacturer will assume only few risks. In particular, it does not assume any inventory (that is for both raw materials and finished products), capacity risk, foreign exchange, bad debt and market risk.

This agreement template is used to state the rights and responsibilities and to substantiate the at arm’s length character of the transaction between a typical principal and contract manufacturer. Common terms in this agreement template inter alia cover the procurement and manufacturing process, price and payment terms, intellectual property rights, limitations of liability and termination.