Toll manufacturing, co-packing and raw material supply contracts

Toll manufacturing and co-packing

The contract has to settle before signature what otherwise gets argued about with product sitting still. These are the points where the value concentrates.

• Ownership of the formula and the development. What belongs to the brand owner, what to the co-packer, and what happens to improvements made during the relationship.
• Specifications and quality control. Product standards, sampling, batch acceptance and rejection criteria and the consequences of non-conforming product.
• Liability for defects. Who answers to the consumer, how that cost is allocated internally, which insurance is required and with what cover.
• Confidentiality and non-compete. Protection of the formula and the process, with limits on time and scope that are enforceable and not merely intimidating.
• Volumes, pricing and adjustments. Minimum purchase commitments, price review rules and what happens when demand spikes or collapses.
• Termination and orderly exit. The fate of inventory, raw materials, moulds and artwork, and the transition period to another plant.

Supply of raw materials and inputs

At the other end of the chain sits the supplier. Here the contract has to answer what happens when the input does not arrive, arrives late or arrives different from what was agreed.

• Technical specifications, certificates of analysis and traceability of the input back to its origin.
• Price, volume, delivery windows and mechanisms for dealing with cost variation.
• Shortage and force majeure: what counts as such, which obligations survive and what alternatives stay open.
• Liability where a defective input forces finished product to be held or withdrawn.
• Supplier audit rights and prior approval of changes the supplier makes to its own process or formula.

The link with the health file

A co-packing contract that does not speak to the health authorisation creates quiet problems. Who appears as holder and who as manufacturer, what happens to the filing if the plant changes, what obligation the co-packer has to maintain the conditions the authority verified, and who bears the cost of amending the file. We review those points alongside the contract, because they are the ones that cost most when the relationship breaks down.

The technical annex, where the contract actually lives

The serious discussion is not in the general clauses but in the specification annex. We build it with the quality team rather than copying a template: product parameters, analytical methods, batch release criteria, deviation handling, sample retention and the documentation each party must keep. A well-built annex prevents most liability arguments, because it defines in advance what it means for the product to be right.

When the contract is already signed

Many clients come to us with the relationship already running and a document nobody has reread since signature. In those cases we review the contract in force against what actually happens in the operation, point out the gaps that are costing money, and propose an amendment or an adjustment letter that can be negotiated without breaking the commercial relationship. Where the breach has already occurred, we prepare the formal notices and organise the evidence of the loss with the quality team.

What the client receives

• The contract drafted or reviewed, with the critical clauses explained in language the signatory can follow.
• The technical annex on specifications and quality, built with the team that will apply it.
• A summary of the obligations sitting with each party, so operations knows what to demand and what to document.
• Support in the negotiation, particularly where the counterparty carries more weight at the table.

Typical situations we handle

• A brand without a plant is about to produce with a third party and needs to protect its formula and its continuity.
• A co-packer wants a contract with clear limits on liability and exclusivity.
• A batch came out defective and the contract does not say clearly who answers, or how far.
• The company is changing plants and needs to exit the previous contract without losing production.
• A supplier changed its formula without notice and the finished product no longer matches what the label declares.