An engineering purchase contract should fix exactly what is being made, how quality will be proven, when and how it is delivered, how and when you pay, who owns the tooling and designs, and what happens if something goes wrong. A purchase order alone rarely covers all of this.
A clear contract protects both sides. Good suppliers welcome it, because it removes arguments later. Have a lawyer familiar with international trade review it before you sign, especially for large orders.
What is being made
- The drawing number and revision, and the specification it refers to.
- Material grades by recognised standard, with the certificates required.
- Finishes, coatings and heat treatment.
- For machines, capacity, power supply, controls, safety features and accessories.
- The documents to be supplied, such as manuals, test reports and conformity declarations.
- The languages of manuals and labels.
Quality and acceptance
State how quality will be proven and who decides. Name the sample approval process, any first article inspection, in-process checks and the pre-shipment inspection. Say who may inspect, such as you, your agent or a third-party inspector, and that the factory must give access.
For machines, describe the factory acceptance test and the site acceptance test, and what counts as a pass. Say that passing the factory test does not remove the supplier's responsibility for hidden defects found later.
Delivery, payment and risk
- The Incoterm and named place, such as FOB Mundra, so the point where risk passes is clear.
- The delivery date or schedule, and the milestones in between.
- Payment stages tied to evidence, such as a passed inspection, rather than dates.
- A clause on delay, such as liquidated damages for each week late, up to a cap.
- Packing requirements, such as export crates with rust protection and ISPM 15 treated wood.
- Which documents the supplier must provide for export and import clearance.
Ownership and changes
Say that drawings, models and specifications you supply remain yours and are confidential. Say that tooling you pay for belongs to you, is marked as yours, is used only for your parts and can be removed on notice. See tooling cost and ownership.
Ban unapproved changes. The supplier must not change material, process, tooling, location or subcontractor for your part without your written approval. Describe how you will request design changes and how cost and timing will be agreed.
Warranty, liability and disputes
Set out the warranty period, when it starts, what it covers, how claims are made and how fast the supplier must respond. Include any retention or performance guarantee. State the limits of liability on each side.
Choose the governing law and the forum for disputes. Many international buyers choose arbitration under recognised rules, with a neutral seat, because court cases across borders are slow. India is a party to the New York Convention, which helps arbitration awards be enforced. Ask your lawyer which option suits your country.
Add clauses on confidentiality, termination and force majeure. Keep them clear and short. A contract that the factory's owner understands is more useful than one nobody reads.
Next step
We work for you, not the factory, and can help you put these terms in place before you order. We also check that the supplier keeps to them during production. For payment structures, see common payment terms for machinery orders. To start, book a free sourcing review.