OEM agreement review checklist

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OEM agreements are used across manufacturing, food and cosmetics, and are often signed quickly once a manufacturer is chosen, with only a light read of the counterparty's template. The gap shows up later: when a defect surfaces, when a labelling error is found after launch, or when the manufacturer turns out to be making a similar product for a competing brand.

Whose specification, whose technology

An OEM agreement typically has the ordering party set the concept, specification and brand, while the manufacturer produces to that specification and the finished product sells under the ordering party's brand. But the underlying structure varies: some manufacturers build strictly to the client's detailed design, others customise their own existing formula or components, and some projects are closer to joint development. Where the client's specification controls, conformity, delivery and inspection carry the weight of the review; where the manufacturer's own technology matters, IP ownership, improvements and restrictions on supplying competitors need careful attention.

Quantity, price and quality sit close to the business itself

Minimum order quantities, forecast orders and cancellation rules should state clearly when an order becomes final and whether cancellation fees or inventory buy-back apply, since sales forecasts change more easily than a manufacturer's committed raw materials and tooling. Pricing should address whether raw-material or logistics cost increases can trigger a renegotiation, since a fixed price over a long-term contract tends to load risk onto one side. On quality, the agreement should fix the inspection method, how hidden defects are handled, and whether a change in raw materials, production site or process needs prior consent or only notice.

Recalls, IP and what happens at termination

A recall clause should set out who is notified, who investigates, who pays and how replacement supply is arranged, because speed matters once a product is already on the market. On IP, the client's trademark and design rights should be kept separate from the manufacturer's formula, know-how and any jointly developed improvements, and any restriction on the manufacturer supplying similar products to competitors should be limited by product, term and territory to remain workable. At termination, inventory, molds, drawings and confidential information should have a clear disposition so neither side is left exposed.