Reviewing a supplier quality agreement

A supplier quality agreement sits alongside the supply contract and sets out how the customer will judge the goods: the specification and standards, the inspection and test regime, what counts as a non-conformance, what the supplier must do about one, and what the customer may charge for it. It can impose liabilities that the commercial contract does not contain. I review the agreement from the supplier's side and return it marked up with a written explanation of the changes and which ones a customer will accept, for a fixed fee of £495 in three working days.

Who this is for

Component manufacturers, processors, contract manufacturers and suppliers in England and Wales that have been sent a quality agreement, quality assurance requirements or supplier quality manual by an automotive, aerospace, medical device, food or industrial customer, and want to know what it adds to the supply contract before they sign it. Both parties are businesses.

What to look for in a supplier quality agreement

The specification, the standards and how they change

The agreement should identify the specification, drawings and standards the goods must meet, and the order of precedence between them and the supply contract when they conflict. The review checks how the customer may change the specification, whether a change entitles the supplier to a price and lead-time adjustment, and whether the customer's approval of samples or first articles is binding on it. The implied terms of satisfactory quality and fitness for purpose in section 14 of the Sale of Goods Act 1979 sit underneath the agreement, and the review checks that the quality agreement does not widen them into a guarantee of performance in the customer's application.

Inspection, acceptance and the right to reject

The agreement will set out incoming inspection, sampling plans and test methods, and may say that the customer's acceptance of a delivery does not affect its right to reject later. Under section 35 of the Sale of Goods Act 1979 a buyer that accepts goods loses the right to reject them for that breach, and under section 15A a business buyer cannot reject for a breach so slight that rejection would be unreasonable. The review asks for a defined inspection period, for latent defects to be the only ground for later rejection, and for the customer's own test methods and tolerances to be the ones that decide conformance.

Non-conformance, rework, sorting and chargebacks

Quality agreements let the customer sort, rework or scrap non-conforming goods at the supplier's cost, charge administration fees for each non-conformance report, and recover line-stoppage costs. The review checks that the supplier is notified and given the chance to inspect and to propose a disposition before the customer acts, that sorting and rework costs are evidenced and at the customer's actual cost rather than a fixed charge, that administration fees are proportionate, and that consequential losses such as line stoppages are excluded or capped in the supply contract and not reintroduced through the quality agreement.

Warranty periods, product liability and recalls

The agreement may set a warranty period running from the customer's sale of the finished product rather than from delivery of the component, and may require the supplier to bear recall costs. Against a business buyer the supplier may limit those obligations if the limitation is reasonable under section 6 of the Unfair Contract Terms Act 1977, and the review checks that the warranty starts from delivery, that recall costs are recoverable only where the supplier's component caused the recall and in proportion to its contribution, and that the General Product Safety Regulations 2005 and Part I of the Consumer Protection Act 1987 liabilities the customer carries as producer are not passed to the supplier in full by indemnity.

Audit, records, sub-suppliers and change control

The customer will want to audit the supplier's site and records, approve the supplier's own sub-suppliers, and be told of any change to process, material, site or sub-supplier before it is made. The review checks that audits are on notice, during working hours, limited to the goods supplied and subject to confidentiality; that record retention periods are stated and achievable; that sub-supplier approval cannot be withheld without reasons; and that the change control procedure has a response period after which silence is consent, so that the supplier is not stopped from making a change the customer has not answered.

Precedence, termination and the supply contract

The quality agreement should not survive the supply contract or vary it by the back door. The review checks the precedence clause, the term, and that termination follows the supply contract; that liability caps and exclusions in the supply contract apply to claims under the quality agreement; and that payment terms are not suspended by an open non-conformance report, since the Late Payment of Commercial Debts (Interest) Act 1998 continues to apply to undisputed invoices. Where the goods are machinery, the Supply of Machinery (Safety) Regulations 2008 obligations on the manufacturer should be allocated rather than assumed.

What it costs

Standard review, £495. Marked-up document and a written explanation of the changes. Three working days.

Complex review, £895. Heavily negotiated or unusually complex documents. Five working days.

Buying online forms the engagement on payment. The scope is what the contract review page describes, you accept the Terms of Service at checkout, and I email you within four working hours to get started. If you would rather ask something first, email me.

What you get

• Your own contract returned with my amendments as tracked changes, plus a clean version with every change accepted, ready to send to the other side
• Comments in the document where a point needs explaining
• A written explanation of what I have changed and why, by email or as an attachment if it is lengthy, marking the points I would hold firm on and the ones that are negotiable
• A view on what is normal market practice and what is the other side pushing their luck
• One round of follow-up questions by email, included

What is not included

• Negotiating directly with the other side, which I quote separately once I know who is on the other side. Where the other side is willing to share a live document, I can work in that document directly
• Drafting a replacement contract from scratch
• Advice on the law of any jurisdiction other than England and Wales
• Tax, accounting or regulatory advice
• Disputes about a contract that is already signed

Questions I am often asked

The customer's quality manual is referred to in the purchase order but we have never been sent it. Are we bound by it?

You may be, if the purchase order incorporates it and you accepted the order. The review asks for the current version to be identified and attached, for changes to it to bind you only on notice and with a right to object, and for the supply contract's liability caps to apply to anything the manual imposes.

Can they charge us a fixed fee for every non-conformance report?

They can if you agree to it. The review asks for administration charges to be proportionate to the cost of handling the non-conformance, for you to be notified and allowed to inspect before any charge is raised, and for the charges to count towards the liability cap in the supply contract rather than sit outside it.

They want a warranty running from the date their product is sold to the end customer. Is that normal?

It is common in automotive and appliance supply chains and it lengthens your exposure by the customer's stock and sales cycle. The review asks for the warranty to run from delivery, or for a long-stop date from delivery after which no warranty claim can be made whatever the sales date.

Related guidance and services

• Contract review, £495, the service this page describes
• Terms and conditions drafting, £995
• Reviewing a supplier agreement from a large customer
• Reviewing a tooling agreement with a supplier

This page is general guidance for businesses in England and Wales, not advice on your own circumstances. Last reviewed: September 2026. Email geoffrey@caesar.co.uk.