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Original Equipment Manufacture (OEM) contract drafting skills for lawyer

Time:2014-03-13 Hit:169


Original Equipment Manufacture (OEM) contract drafting skills for a lawyer


     The Original Equipment Manufacture (hereinafter referred as OEM) contract is designed for use by a buyer wishing to engage a PRC-based manufacturer to produce certain specified goods, the trademark is attached at the direction of the buyer, The specifications of the products is mainly at the discretion of the buyer, the seller is manufacturing the products solely for the buyer. The key provisions of this contract are as follows:

1. Grant of License

Subject to the terms and conditions of the contract, the buyer shall grant to the manufacturer a non-exclusive, non-transferable license to use the buyer's technical specifications to manufacture goods to be supplied only to the buyer and the buyer may make changes to the product.

2. Specification

Manufacture undertakes to manufacture and package the goods following the buyer's specifications and to make available all appropriate manufacturing facilities, equipment and staff. In addition, the manufacturer must keep proper records of goods manufactured for the buyer and comply with all relevant laws.

3. Qualification

If the product does not conform satisfactorily to the acceptance of the customers or their representatives, the supplier shall promptly take all actions necessary to rectify all defects, failures, malfunctions or errors in the products identified thereof.

4. Forecasts and minimum purchase quantity

The buyer irrevocably guarantees that it will purchase from the seller the products in the quantities specified in Exhibit X during the contract year. The parties hereto shall mutually agree upon the minimum purchase quantity at least 2 months before the beginning of each subsequent contract year. In the event that the buyer and seller fail to recognize the minimum purchase quantity for the next contract year, it shall be deemed to be the same as the then-applicable minimum purchase quantity.

In case the buyer fails to achieve the minimum annual purchase target as specified herein for a reason, unless solely and clearly attributable to seller, seller has the right to terminate this contract and to request the compensation with respect to all damages, including but not limit to the loss of sales opportunity, expressed or implied, arising from its non-completion of the minimum annual purchase target, and to sell the products directly to any third party in the territory.

5. Restrictions on the Contractor

The seller undertakes not to produce any goods similar to those which it has agreed to produce for the buyer. This Clause is essential in any contract for contract production, as it makes it a breach of contract to supply similar or competing products to any third parties.

6. Intellectual Property Indemnification

Buyer agrees to save and hold the seller harmless from all claims, demands, proceedings, suits and actions and costs, including without limitation, reasonable fee and disbursements of counsel, arising out of or in connection with, any infringement of industrial property rights, whether actually alleged or not, against buyer or seller by reason of manufacture, use, sale, distribution or disposition on buyer's country or elsewhere in the world of the products sold hereunder, under the law of any country in which such products may be made, used or sold.

Intellectual property rights in respect of the technical specifications used by the seller and any brand names attached to the goods continue to belong to the buyer, and the seller is only licensed to use such rights for the purposes of producing goods for the buyer in accordance with the terms of the contract. This type of provision must be put into any contract production services contract, and the buyer should also consider registering their trademarks in the PRC as soon as they are able to do so.

7. Changes of specification

The specification may be amended from time to time by written agreement of the parties hereto, which shall set forth in detail any changes where such changes in the design of the products and the buyer shall bear any cost or expense resulting from such changes.

8. Confidentiality

Any information, suggestions, or ideas transmitted by either party to the other party in connection with the performance of this contract are to be regarded as secret or submitted in confidence. Except as may be otherwise provided by a written agreement signed by the authorized representatives of the parties, neither a party nor any officer, director, partner, agent or employee of a party, any of its subsidiaries or parent or sister corporations, shall disclose any such information to any third party or the public







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