Every successful wholesale business understands the importance of having robust and clear wholesale agreements. These documents play a pivotal role in defining the relationship between wholesalers and their buyers, and ensure that the terms of the business relationship are clearly understood by both parties. A crucial aspect of these agreements is the Minimum Advertised Price (MAP) policy, which is designed to preserve the value of products in the market and maintain a level playing field for all retailers. In this blog post, we’ll delve into the intricacies of drafting a wholesale agreement, with an emphasis on the MAP policy.
The Purpose of a Wholesale Agreement
A wholesale agreement is a legally binding contract between a wholesaler (the seller) and a buyer, which could be a retailer, distributor, or another wholesaler. The agreement outlines the terms and conditions of the sale and purchase of products, ensuring that both parties are fully aware of their rights, obligations, and the consequences of not meeting these obligations.
This document is instrumental in preventing misunderstandings that could lead to disputes. It also provides a clear roadmap for the course of the business relationship, detailing every facet from ordering procedures to return policies, exclusivity agreements, confidentiality clauses, and pricing policies, including the MAP policy.
What is a Minimum Advertised Price (MAP) Policy?
The Minimum Advertised Price policy is a vendor’s policy that sets the lowest price at which a retailer can advertise the vendor’s products. It’s important to note that the MAP policy doesn’t dictate the selling price; it merely sets a boundary for the advertised price. This policy helps maintain the perceived value of products, prevent price wars, and ensure that small and large retailers can compete fairly.
The Structure of a Wholesale Agreement with a MAP Policy
Effective Date and Parties
The agreement begins by specifying the effective date and the parties involved in the agreement – the seller and the buyer.
Scope
This section details the agreement’s purpose. It includes the products’ description, and the parties’ agreement to abide by the terms and conditions set in the agreement.
Ordering Procedure
The ordering procedure outlines how orders will be placed and fulfilled, the payment method, the delivery schedule, and the initial payment amount required.
Inspection, Acceptance, and Rejection of Products
This part of the agreement gives the buyer the right to inspect the products within a specified period and reject them if they are defective. It also explains the seller’s obligation to replace defective products.
Return Policy
The return policy provides the conditions under which products can be returned. This could be due to defects identified during the inspection period or damage attributable to the customer.
Shipping Policy
The shipping policy clarifies who bears the shipping costs and the shipping method to be used.
Exclusivity
If there is an exclusivity arrangement, it is detailed in this section. The terms include the minimum quota of products the buyer needs to purchase each month to maintain exclusivity.
Disclaimer of Warranties and Limitation of Liability
This section contains a disclaimer of warranties related to the products and a limitation of liability clause, which sets a limit on the amount the seller can be held liable for in relation to the products.
Confidentiality
The confidentiality clause ensures that both parties agree to keep any confidential information obtained during the course of the agreement secret.
Minimum Advertised Price (MAP) Policy
This section is crucial in protecting the value of the seller’s products. It requires the buyer to adhere to the MAP set by the seller and outlines the consequences of not adhering to this policy.
General Provisions
The general provisions include governing law, severability, notices, waiver, counterparts, prevailing language, and entire agreement. These elements are standardin most contracts and form the backbone of the legal agreement.
MAP Policy in Detail
Policy Application
The MAP policy applies to the buyer, who agrees not to advertise the seller’s products at a price lower than the minimum advertised price set by the seller.
Pricing Information
The seller is responsible for providing the buyer with the MAP for each product. If there’s no specific MAP for a product, the MAP defaults to the wholesale price the buyer paid for the product.
Price Review
The seller has the right to review the buyer’s pricing periodically, and the buyer is obligated to provide the necessary information for these reviews.
Policy Violation Consequences
If the buyer advertises or sells the products below the MAP, the seller can decide to stop supplying products to the buyer.
Policy Exceptions
Exceptions to the MAP policy can only be granted at the seller’s discretion and must be documented in writing.
Wholesale Agreement Template
WHOLESALE AGREEMENT
This Wholesale Agreement (the “Agreement”) is entered into as of ___________, 2023 (the “Effective Date”) between _____________________ (“Seller”), and __________________ (“Buyer”).
- SCOPE
- The Seller agrees to sell and deliver, and the Buyer agrees to purchase and receive, certain products (the “Products”) in accordance with the terms and conditions set forth in this Agreement.
- The Products will be sold to the Buyer at the prices agreed upon by both parties, as detailed in the Order Form attached as Exhibit A to this Agreement.
- ORDERING PROCEDURE
- As part of the exclusivity arrangement between the Seller and the Buyer, a predetermined quantity of Products will be shipped to the Buyer every month, with the first shipment commencing on the date agreed upon by both parties.
- The Buyer agrees to pay ___% of the total amount for the first shipment upon placing the first order. The remaining balance will be paid after the Products have been received by the Buyer.
- INSPECTION, ACCEPTANCE, AND REJECTION OF PRODUCTS
- The Buyer will be granted an inspection period of ___ days from the date of receipt of the Products.
- If defects are discovered during the inspection period, the Buyer must notify the Seller within the inspection period. The Seller will replace any defective Products identified during the inspection period at no additional cost to the Buyer.
- RETURN POLICY
- No Returns: Once the Products have been inspected by the Buyer, no returns will be accepted, except in the case of defects identified during the inspection period. If defects are identified during the inspection period, the Seller will replace the defective Products.
- Returns: The Products may not be returned if they have been used. If the Product’s damage is attributable to the customer, no returns will be accepted. The Buyer may elect to be compensated by receiving replacement Products of the same quantity or a refund of the purchase price.
- SHIPPING POLICY
- Buyer-Paid Shipping: If the Buyer elects to pay for shipping, a discounted payment of $_____ will apply.
- Seller-Paid Shipping: If the Seller elects to pay for shipping, a payment of $_____ will apply.
- EXCLUSIVITY
The Seller agrees to grant the Buyer exclusivity within the wholesale district located in Los Angeles, CA. This exclusivity is contingent upon the Buyer purchasing a minimum quota of Products each month as agreed upon in the Ordering Procedure section of this Agreement. If the Buyer fails to meet this minimum quota in any given month, the Seller has the right to reconsider the exclusivity agreement.
- DISCLAIMER OF WARRANTIES AND LIMITATION OF LIABILITY
- Disclaimer of Warranties: The Seller expressly disclaims all warranties related to the Products, whether express or implied, including, but not limited to, any implied warranties of merchantability, fitness for a particular purpose, and non-infringement, to the extent permissible under applicable law. The Seller does not represent or warrant that the Products will meet the Buyer’s requirements or that their operation will be uninterrupted or error-free.
- Limitation of Liability: In no event shall the Seller be liable to the Buyer or any third party for any loss of profits, loss of use, loss of revenue, loss of goodwill, any interruption of business, or for any indirect, special, incidental, exemplary, punitive or consequential damages of any kind arising out of or in connection with this Agreement or the Products, regardless of the form of action, whether in contract, tort, strict liability or otherwise, even if the Seller has been advised or is otherwise aware of the possibility of such damages. The Seller’s maximum aggregate liability under or in connection with this Agreement or the Products will in no event exceed the total amount paid by the Buyer to the Seller under this Agreement during the twelve-month period immediately preceding the event giving rise to such liability.
- CONFIDENTIALITY
Both parties acknowledge and agree that, during the course of this Agreement, each may obtain confidential information regarding the other party and its business (the “Confidential Information”). Both parties agree to retain in confidence all Confidential Information received from the other party, in a manner reasonable and necessary to protect the confidentiality of the Confidential Information. Neither party shall use, nor disclose to any third party, any Confidential Information of the other party, except as required by law or as expressly permitted by this Agreement. This confidentiality obligation shall survive termination or expiration of this Agreement.
- MINIMUM ADVERTISED PRICE (MAP) POLICY
- Policy Application. The Buyer agrees to sell the Products to retail customers at a price that is no lower than the Minimum Advertised Price (MAP) established by the Seller for each product. The MAP for each product is as agreed upon by the Seller and Buyer.
- Pricing Information. The Seller will provide the Buyer with the MAP for each product, but if there is no specific MAP agreed upon for a product, then the MAP will be the wholesale price paid by the Buyer for that product.
- Price Review. The Seller reserves the right to review the Buyer’s pricing from time to time and the Buyer agrees to provide the necessary information related to retail pricing of the Products for such reviews.
- Policy Violation Consequences. If the Buyer advertises or sells any Products at a price lower than the MAP, the Seller may choose to discontinue supplying Products to the Buyer.
- Policy Exceptions. Exceptions to this MAP policy may be granted at the Seller’s sole discretion and must be provided in writing. In the absence of a written agreement to the contrary, this MAP policy stands.
- GENERAL PROVISIONS
- Governing Law. This Agreement and any action related thereto will be governed and interpreted by and under the laws of California, without regard to its conflict of law provisions that would result in application of any other law. All disputes arising out of this Agreement shall be resolved by courts located in the aforementioned jurisdiction.
- Severability. If any provision of this Agreement is, for any reason, held to be invalid or unenforceable, the other provisions of this Agreement will remain enforceable and the invalid or unenforceable provision will be deemed modified so that it is valid and enforceable to the maximum extent permitted by law.
- Notices. Each Party must deliver all notices or other communications required or permitted under this Agreement in writing to the other Party, by email, by courier, by certified or registered mail (postage prepaid and return receipt requested), or by a nationally-recognized express mail service. Notice will be effective upon receipt or refusal of delivery. If delivered by certified or registered mail, notice will be considered to have been given five (5) business days after it was mailed, as evidenced by the postmark. If delivered by courier or express mail service, notice will be considered to have been given on the delivery date reflected by the courier or express mail service receipt. Each Party may change its address for receipt of notice by giving notice of the change to the other Party.
- Waiver. Any waiver or failure to enforce any provision of this Agreement on one occasion will not be deemed a waiver of that provision or any other provision on any other occasion.
- Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original and all of which shall be taken together and deemed to be one instrument.
- Prevailing Language. The English language version of this Agreement shall prevail over any translations of this Agreement.
- Entire Agreement. This Agreement, and any addendum or amendment, constitutes the entire agreement between the parties pertaining to the subject matter hereof and supersedes all prior agreements, understandings, negotiations, and discussions, whether oral or written, of the parties.
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement.
| SELLER | BUYER |
| X: _____________________________ Name, Title:______________________ Date: ___________________________ | X: _____________________________ Name, Title:______________________ Date: ___________________________ |
Exhibit A ORDER FORM
