Modern business is a rather complex structure with many possible operations of economic and financial activities. All of them must be implemented in accordance with the laws of the country in which they occur. In addition, entrepreneurial activity is always a risk. And in order to minimize the possible negative consequences for the organization or entrepreneur, it is necessary to properly formalize all relations and monitor compliance with the law at all stages of transactions and processes. For this there is such a thing as a contract. This article will focus on the essence of this document, its legal and entrepreneurial foundations, the significance of contractual relations for the parties. Specifically, the validity of the supply contract, its varieties, extension methods and other practical points are analyzed.
Definition of a concept
The transfer of goods, materials, technical equipment and other items of economic activity should be accompanied by the signing by the parties of special documents reflecting the essence of the operation. The most important of the whole package is the agreement between the parties on the purchase and sale of certain goods. It is the basis of the transaction and contains a set of information about the parties, the goods being transferred, the terms, the moment of transfer of ownership, payment rules, guarantees and liability of the parties. Most often, a supply contract is used for these purposes in the business sphere.
Legal value
The supply contract in the legal sense is the basis for the beginning of trade relations. Without it, it is impossible to determine the rights and obligations of the parties, warranty conditions and liability in case of violation of agreements.
Any court may refuse to initiate a case of violation of the rights of one of the parties during the transaction, if an agreement has not been drawn up. The same situation is with the tax authorities: if no grounds have been introduced between commercial entities, this activity can be declared illegal.
The presence and observance of the validity of the supply agreement guarantees entrepreneurs and organizations no problems in communicating with the tax service, as well as the opportunity to defend their interests in court if the opponent violated the terms of the transaction.
Significance of the contract for signatories
The parties to the supply contract are the supplier and, accordingly, the buyer. When drawing up this kind of agreement, several conditions must be taken into account:
- a legal entity or an individual entrepreneur can act as a supplier (a supplier cannot be a person not involved in commercial activities);
- the buyer purchases the products for the purpose of further resale, use as raw materials in the production, construction, and economic purposes of the organization itself (goods purchased under a supply agreement cannot be used for personal, family, and other similar purposes);
- the subject of the supply contract cannot be securities, real estate, the share of the authorized capital, as well as goods prohibited or limited by law.
For both parties, the contract is a guarantee of fulfillment of obligations. The compromises agreed by the parties are made point by point in the document, fixed by signatures and seals of authorized representatives of organizations or individual entrepreneurs. After that, the document becomes legal, and its content becomes binding on both parties. The term of the supply contract also applies to this clause.
Varieties of supply contracts
A supply contract can be applied to a wide variety of groups of goods and their volumes. Differences in them can be determined by the desire of the parties themselves. So, for example, there may be a contract for a one-time supply or for regular receipts of goods. Delivery can be taken into account in it, or the buyer himself can arrange the transportation of the purchase to the necessary territory. The document may establish the delivery dates for each individual batch, or take into account the total nominal volume, which will be shipped for the entire duration of the supply agreement. Each individual clause of the contract is discussed by the parties during the conclusion process, additional columns may be introduced at the request of the parties.
Duration of the contract for the supply of goods
There may be some confusion about the timing of the supply contract. There are two fundamentally different concepts regarding terms:
- delivery time of goods to the buyer;
- term of the contract for the supply of goods.
The validity of the contract itself depends on the information indicated in it. The parties may use such a sample of the duration of the supply contract:
- the contract expires when the parties fulfill their obligations - that is, the supplier has shipped the entire agreed volume of goods, and the buyer has paid it in due amount;
- the contract expires on a certain date - the parties have agreed in advance on the date on which they must complete all the procedures for this transaction;
- the contract is valid for a year after signing - the approximate date of completion of the transaction is also determined.
Also, the duration of the supply contract may not be indicated. This situation arises if the deadline is not agreed. Legally, a contract without an expiration date is perceived as a one-time transaction.
Many companies practice automatic renewal of contracts. Then the paragraph appears in the text that if the parties did not notify each other in advance of the termination of cooperation, the contract is automatically extended for the specified period.
Delivery time
If we talk about the delivery time, it is necessary to take into account a number of factors associated with an increase or decrease in cargo time in transit, as well as the duration of its preparation for transportation:
- geographic remoteness of the supplier and buyer;
- agreed delivery method and its duration;
- terms of preparation of the party for dispatch;
- customs and other border procedures;
- unscheduled inspections inhibiting the delivery process;
- other force majeure circumstances.
The contract must specify the deadline for delivery, which the supplier focuses on. In cases where dates are not set, the delivery of the requested quantity of goods is calculated in equal batches at the same intervals (for example, monthly).
Document Composition
Any document has a specific composition, including a supply contract. A well-formed contract can help parties to the agreement to stop unnecessary disputes, eliminate omissions and clearly limit the deal. Thus, the document should contain a maximum of points important to the parties. It has approximately the following composition:
- information about the seller and the buyer, their bank details, data on registration with the tax authority, actual and legal address;
- Subject of the contract - namely, goods that are delivered indicating the nomenclature, price and quality;
- delivery time of consignments;
- terms of delivery and shipment;
- liability for short delivery, shortage, delay or early delivery;
- price of goods, their quality characteristics and completeness;
- terms of payment for the goods;
- order of delivery of goods;
- actions in case of force majeure events;
- penalties, fines, penalty for violation of the terms of the contract;
- contract time;
- details, signatures and stamps of the parties.
Stage of execution of the supply contract
The process of concluding a contract can be divided into four stages:
- one of the parties offers its own version of the contract for consideration by the other;
- the second side considers the initial version, proposes its own corrections and supplements the presented list of items with necessary inclusions;
- the parties come to a compromise consisting of clauses, described conditions, specified obligations and responsibilities, accept the final layout of the document;
- the parties sign the document, one copy is transferred to the supplier, the other to the buyer.
The initiator of the beginning of the contractual relationship may be any of the parties. The date of conclusion of the contract is the date of acceptance, that is, the consent of the parties to the final version of the document. How long the supply contract is valid depends on the information indicated in it and the date of acceptance.
Regulations
The conclusion, content, fulfillment of duties and the resolution of contentious issues under supply contracts is regulated by the Civil Code of the Russian Federation. Under all these points, a rather extensive list of articles, provisions and individual legal acts has been highlighted. Basic concepts and answers to frequently asked questions can be found in the following articles of the Civil Code of the Russian Federation: 161, 424, 480, 469, 475, 509, 510, 511, 513, 514, 515, 516, 518, 519, 523.
All proceedings under contracts of this type in court are held in the Arbitration Court. The plaintiff must first notify the defendant of his intention to sue by letter.
Deliveries outside the contract period
There are several scenarios of cooperation in which the supplier and the buyer interact outside the contract. The first option is shipment before the actual signing of the contract. The second is delivery after the expiration of the contract.
Both scenarios are extremely undesirable for organizations, if you look at the situation from a legal point of view. Too early delivery may raise concerns with government control services. It can be recognized as unfounded and inconsequential. Shipment after the expiration of the supply contract has been completed may be subject to judicial penalties.
Shipment before the conclusion of the contract
It happens in the business sector when a contract is in the process of consideration and acceptance for a long time. Especially often, this trend is observed in large organizations where a multi-level system of leadership is practiced. In this case, the supply of goods begins even before signing. This situation can be resolved in the following legal ways:
- mention in the contract that commercial relations between the parties begin before it is signed;
- execution of one-time shipments, accompanied by a full package of documents and specifications;
- signing an agreement of intent between the parties.
Shipments after expiration
If the supplier has delayed the delivery of the goods proposed by the plan, he must deliver all the missing goods. A condition is delivery in another reporting period, but within the scope of the contract. If the contract has already expired, you can recover penalties, fines and penalties, as well as the cost of paid products through a court. At the same time, it is necessary to prove that the delivery was disrupted by the fault of the supplier, not the buyer.
Even if the supplier has the opportunity to transfer the goods after the expiration of the contract, this may not save him from penalties. According to the law, even if the goods were shipped, but the deadlines expired, the supplier may be required to pay a penalty.
If the buyer is the culprit in disrupting timely deliveries, the supplier with a clear conscience can terminate them upon completion of the contract. At the same time, no court will oblige him to ship undelivered goods or return money. The delivery of goods after the expiration of the contract may cease without any penalties.
Agreement renewal procedure
Extension of the supply contract is a fairly common practice. For this, it is necessary to draw up an Additional Agreement to the Agreement containing the changes that need to be made. Namely, the validity period or the volume of additional shipments. Other amendments to commercial relations can be added to the same supplementary agreement to the contract. For example, the volume and frequency of batches, product quality, delivery conditions. This document is signed by the parties and stored by each of them as a part inseparable from the contract.
The extension of the contract is not always advisable, and it can not be carried out in all situations. For example, a contract that has already lost the point of continuing may be legally powerless. Such is a document, shipments on which are completed and paid in full. Also, the contract is not extended, since the expiration of which too much time has passed. In this case, it is advisable to conclude a new cooperation agreement.