Advisory Case on Concluding a Short-Term Supply Agreement with an Overseas-Based Company

1. The Client's Situation

Domestic manufacturer Company A needed to conclude a short-term master transaction agreement in order to stably receive core components from overseas chemical materials company Company B for one year. However, the draft contained an automatic-termination clause upon expiry, leaving long-term supply stability uncertain, and key terms such as the cap on damages and dispute resolution were drafted in a biased manner. Company A, needing to minimize risk while also concluding the contract quickly, entrusted Your Legal Team with the entire process of contract review and negotiation.

Your Legal Team reviewed the entire draft and (1) additionally clarified the contract-extension option and the procedures for changing orders and quantities; (2) aligned the timing of delivery and transfer of risk and the payment deadline with the client's accounting cycle, thereby improving cash flow. We also (3) revised a clause that limited the seller's liability solely to a cap on direct damages, securing substantive remedies in the event of quality defects or delayed delivery; and (4) supplemented the agreement so that ICC arbitration (Singapore) rules could be pursued in parallel with provisional injunction procedures before the domestic courts. In addition, we reorganized compliance clauses such as anti-corruption, software license compliance, and provision of country-of-origin information, thereby minimizing supply-chain risk.

The final contract was revised into a form with a balanced allocation of risk compared with the original draft, and Company A completed signing and effectuation on time while securing a favorable position in terms of supply stability, payment conditions, and the scope of quality warranties. The in-house procurement and finance departments reduced the burden of fund management through a predictable payment schedule, and management became able to control the possibility of disputes in advance. Your Legal Team continues to provide advice on monitoring contract performance and preventing disputes even after conclusion, supporting Company A's global supply-chain expansion strategy.