SA Termination clause in supplier agreement contract

Australia's #1 for Law
Join 150,000 Australians every month. Ask a question, respond to a question and better understand the law today!
FREE - Join Now

Bob1975

Active Member
17 November 2014
10
1
34
HI, we run a uniform & workwear shop. We are in negotiations with local school to buy and sell their uniform through our shop. The uniform is custom made and embroidered with school logo and our stock holding value could exceed $150k. A contract has been drawn up by the school. We do not agree to the Termination clause. As the uniform is custom made, we need to ensure they buy the uniform from us if the contract is terminated early for any reason. They will not agree to this. So I advised them, the sub clauses are quite vague and open to interpretation. I asked them to clarify the clause and to provide specific reasons why contract could be terminated and that the reasons should be considered very serious to warrant leaving us with their uniform that has no value to us but does to them. I don't agree that they can terminate contract if my employees commit a crime etc. as this is beyond my control and I would like clarification on what offences, ie can they terminate for a speeding fine or something trivial or non related to selling school uniform.

Should I be concerned or am I over thinking it? I feel they could make up any excuse to terminate contract and get them out of purchasing the uniform.

14.1 Any Party may terminate this agreement immediately by notice in writing at any time if:

14.1.1.
14.1.2.
14.1.3.
14.1.4.
14.1.5. the other Party or any of the other Party’s employees, contractors or sub-contractors undertaking the Services are charged with, reported for or found guilty of misconduct; or
14.1.6. the other Party or any of the other Party’s employees, contractors, sub-contractors or sub-contractors undertaking the Services are charged with, reported for or convicted of a criminal offence of a type which brings the Party’s reputation into disrepute and as a consequence the other Party reasonably believes that its continued engagement with the Party is prejudicial or detrimental to the reputation of the Party,

and where it is the School that terminates the agreement under this clause 14.1, no amount will be payable by the School to supplier on that termination despite the obligation that the School would otherwise have for purchase of items under clauses 2 or 15.
 

Rod

Lawyer
LawTap Verified
27 May 2014
7,269
990
2,894
and where it is the School that terminates the agreement under this clause 14.1, no amount will be payable by the School to supplier on that termination despite the obligation that the School would otherwise have for purchase of items under clauses 2 or 15.
Strikeout the above and all is likely OK.

I agree, clauses 14.1.5 and 14.1.6 are so vague they can terminate effectively at will for almost any trivial reason.

Requires substantial changes, such as:

Replacing 'misconduct' with 'serious misconduct likely to bring the Party's reputation ...'
Remove 'reported' (anyone can make a report)
etc

Otherwise you will need similar clauses in your supplier agreements.

The school is likely trying to ensure no child exploitation or slavery in their supply chain ( a la Apple), but it shouldn't give them the right to lump you with significant costs with products that have no value elsewhere.

Probably is worth getting a statement from your supplier saying they do not use child labour etc in the products. Maybe that will satisfy the school and the clauses can be removed.
 

Docupedia

Well-Known Member
7 October 2020
324
43
719
Agreeing to voluntarily comply with the Modern Slavery Act might go some way to allaying their concerns, if supply chain circumstances are a relevant factor. Be aware that doing so places obligations on you to investigate and potentially report on all the relevant steps in the process; and the overseas textile trade is potentially rife with practises that fall under the legislation. The concept of slavery is expansive too, and captures things like economic slavery where the worker is technically free to leave but subjected to heavy financial penalties for them or their family if they try to quit.
 

Bob1975

Active Member
17 November 2014
10
1
34
Strikeout the above and all is likely OK.

I agree, clauses 14.1.5 and 14.1.6 are so vague they can terminate effectively at will for almost any trivial reason.

Requires substantial changes, such as:

Replacing 'misconduct' with 'serious misconduct likely to bring the Party's reputation ...'
Remove 'reported' (anyone can make a report)
etc

Otherwise you will need similar clauses in your supplier agreements.

The school is likely trying to ensure no child exploitation or slavery in their supply chain ( a la Apple), but it shouldn't give them the right to lump you with significant costs with products that have no value elsewhere.

Probably is worth getting a statement from your supplier saying they do not use child labour etc in the products. Maybe that will satisfy the school and the clauses can be removed.

Strikeout the above and all is likely OK.

I agree, clauses 14.1.5 and 14.1.6 are so vague they can terminate effectively at will for almost any trivial reason.

Requires substantial changes, such as:

Replacing 'misconduct' with 'serious misconduct likely to bring the Party's reputation ...'
Remove 'reported' (anyone can make a report)
etc

Otherwise you will need similar clauses in your supplier agreements.

The school is likely trying to ensure no child exploitation or slavery in their supply chain ( a la Apple), but it shouldn't give them the right to lump you with significant costs with products that have no value elsewhere.

Probably is worth getting a statement from your supplier saying they do not use child labour etc in the products. Maybe that will satisfy the school and the clauses can be removed.
Thanks, The struck out line was not in original draft. I previously asked them to add to the Termination clause, In the event of early termination, all conditions of clause 2 remain (clause 2 states the school will purchase the uniform at the end of the 2 year agreement). They responded by adding the complete opposite, confirming what I thought their intention was.
The school chose the 2 manufacturers, we had no involvement. So I would have them excluded from our contractor list if they were concerned about child exploitation.
Generally in the uniform industry, any customised garment is non refundable unless faulty. I think I need a clause that states something like ' Suppler (me) will purchase and pay for uniform and hold in stock on behalf of school, the customised uniform remains the property of the school. The school will buy any stock held by supplier when contract expires or is terminated, at cost price to supplier.
 

Bob1975

Active Member
17 November 2014
10
1
34
Agreeing to voluntarily comply with the Modern Slavery Act might go some way to allaying their concerns, if supply chain circumstances are a relevant factor. Be aware that doing so places obligations on you to investigate and potentially report on all the relevant steps in the process; and the overseas textile trade is potentially rife with practises that fall under the legislation. The concept of slavery is expansive too, and captures things like economic slavery where the worker is technically free to leave but subjected to heavy financial penalties for them or their family if they try to quit.
Thanks for your feedback.
 

Bob1975

Active Member
17 November 2014
10
1
34
On another note. We have supplied this school for many years with no contract in place. When they asked us to supply new uniform, we agreed. No contract was talked about. The agreement was verbal between principal & vice principal and made in March 21. Come August 21, the Principal has left and a Temp Principal appointed. The Temp principal decides he wants a contract. We negotiate for many months and now Dec 1st, he tries to force us to sign contract that we advised we don't agree to. His response is 'we have no agreement, so you can not sell uniform' but we have been working on this deal together for 9 months. I think requesting a contract well after an agreement was made and orders placed is quite unethical business practice, especially if you try and force unfair conditions.
 

JackOnTable

Active Member
5 January 2022
5
1
31
Strikeout the above and all is likely OK.

I agree, clauses 14.1.5 and 14.1.6 are so vague they can terminate effectively at will for almost any trivial reason.

Requires substantial changes, such as:

Replacing 'misconduct' with 'serious misconduct likely to bring the Party's reputation ...'
Remove 'reported' (anyone can make a report)
etc

Otherwise you will need similar clauses in your supplier agreements.

The school is likely trying to ensure no child exploitation or slavery in their supply chain ( a la Apple), but it shouldn't give them the right to lump you with significant costs with products that have no value elsewhere.

Probably is worth getting a statement from your supplier saying they do not use child labour etc in the products. Maybe that will satisfy the school and the clauses can be removed.
Thank you, I read your answer and realized that there can be many pitfalls in a contract, even about one word. It is good that there are lawyers who can explain.
As for the School, for some reason it seems to me that they are playing some kind of game. Maybe they want to be able to not pay money for nothing. It would be worth considering the personal relationship between the people who signed the contract.
On another note. We have supplied this school for many years with no contract in place. When they asked us to supply new uniform, we agreed. No contract was talked about. The agreement was verbal between principal & vice principal and made in March 21. Come August 21, the Principal has left and a Temp Principal appointed. The Temp principal decides he wants a contract. We negotiate for many months and now Dec 1st, he tries to force us to sign contract that we advised we don't agree to. His response is 'we have no agreement, so you can not sell uniform' but we have been working on this deal together for 9 months. I think requesting a contract well after an agreement was made and orders placed is quite unethical business practice, especially if you try and force unfair conditions.
I also know several cases where people work without a contract - and everything is smooth and calm, because everyone is responsible for his words. But in your situation, a new person came in and that changes things.
 

Bob1975

Active Member
17 November 2014
10
1
34
well school broke the agreement they made with us. The principal contacted our suppliers and advised them our orders need to go to a new retailer they have found. How the hell can he ring our suppliers and change our orders!! It is in a way a good thing as there was a possibility our supplier could make us pay for what we ordered.
 

JackOnTable

Active Member
5 January 2022
5
1
31
Consider the possibility that the problem is not with you, but with the principal. There is a possibility that the director is not interested in continuing to cooperate because he has a stake in the firm of other salespeople who have been chosen instead of you. This is just my assumption, nothing more :)