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If you rely on the supply of packaging from a third party, there is a lot to consider. Does the quality meet your brand standards? Do the materials fulfill the environmental specifications? How much wastage is acceptable? Will you incur a financial loss due to delays, for instance, if the goods to be packaged are perishable, seasonal, or fail to reach customers undamaged?

First impressions count, and packaging is often a substantial part of the costs in taking a product to market. Most problems can be pre-empted and addressed in your contract with the supplier, so it is advisable not to skim over or accept standard supply terms and conditions without seeking legal advice first.

A detailed review of the contract or terms of business will provide an opportunity to plug any gaps or address any concerns before issues actually arise.

Delays in delivery

The impact of delays will depend on your product range, but suppliers typically do not like to include ‘time being of the essence’ in the contract.

While, as a purchaser, you may not be able to prevent delays, it is possible to consider strategies or remedies you could rely upon to reduce any impact on your business. For example, by negotiating credits against future invoices or a right to terminate. You should also try to ask for as much notice as possible when it comes to delays to allow you to better manage this from your end.

Quality control issues

Another likely issue with packaging that you could encounter may be related to the actual type and quality of materials used and whether the packaging is in fact fit for purpose. Not only can issues such as faulty seals cause you financial loss, but it can also damage your market reputation or even subject you to an industry recall.

Supply contracts usually have the standard ‘must be fit for use … in accordance with industry standards’ language. For more robust protection, it is advisable to include provisions that deal with strict parameters and what recourse you would have if there was to be a breach of the quality expected.

Wastage

Another consideration is where you receive your packaging order and, once manufacturing or use of the packaging commences, you realise that a larger than usual proportion of packaging is unusable or considered wastage.

Some supply contracts may include a wastage buffer to allow the supplier to provide a certain percentage that may fall into this buffer, but you should also set out clear rights and/or remedies if this buffer is exceeded such as credits against invoices.

Pricing changes during the term of the contract

Depending on how your supply chain contract or terms are written, there may be the ability for the supplier to change pricing during a contract term. Whist this is not necessarily an unreasonable request in long-term contracts where the market can easily change, you should consider negotiating such terms, for example by placing a cap on such price increases or asking for a right to terminate if you do not agree to the price increase.

How we can help

Packaging is a vital element of many products, particularly luxury goods, perishable goods, or items which are ordered online.  Our solicitors will help you navigate and tighten up those often supplier-friendly contracts with more confidence and prepare for unexpected bumps in the road.

For further information, please contact one of our Commercial Contracts experts.

This article is for general information only and does not constitute legal or professional advice. Please note that the law may have changed since this article was published.