10 Questions to Ask Before Signing a Third-Party Manufacturing Agreement
A signed manufacturing agreement will outlast the excitement of a first launch. It decides who owns the formula, what happens to leftover packaging, and how either side can walk away.
This third party manufacturing agreement checklist lists ten questions to settle in writing before you sign. It is meant to be carried into your next meeting and ticked off as the answers come, one by one.
Why the Agreement Deserves More Attention Than the Price List
A verbal understanding feels fine while everyone is friendly and orders are flowing. It stops feeling fine the first time a batch is late, a packaging shipment is short, or a label needs correcting. Written terms turn those moments into procedures instead of arguments.
They also show you how a manufacturer behaves: a partner who explains each clause patiently is telling you something useful about how the working relationship will go.
If a draft arrives with terms you never discussed, don't treat them as a formality. Ask what each unfamiliar clause is for, and request changes in writing. Reasonable manufacturers expect questions and would rather answer them now than resolve a dispute later.
Questions About the Product Itself
1. Who Holds Which Licence?
Find out how the licensing arrangement works for your product. In a typical set-up your brand operates under a loan licence while the facility holds its own manufacturing licence. Ask for the licence details in writing, and ask what happens to your products if the facility's licence status ever changes. It's also fair to ask which of your own registrations the manufacturer expects to see before production starts, so nothing surprises you a week before your first batch.
2. Who Owns the Formula?
This one causes more disputes than any other. Clarify whether the formula is yours, the manufacturer's, or shared, and whether the same formula can be sold to another brand. Confidentiality terms should be explicit, and if you've paid for development, the agreement should say what that payment bought you.
3. What Are the Batch Size and Pricing Terms?
Get the minimum order quantity stated, along with the price at that quantity and at larger ones. Ask whether the minimum applies per product, per variant, or per order, because those three readings lead to very different commitments.
Questions About Materials and Quality
4. Who Buys Packaging, and What Happens to Leftovers?
If the manufacturer sources tubes, bottles, or cartons, ask who pays when a batch is smaller than the packaging order. Printed materials carry your branding, so leftover stock has little value to anyone else. Agree upfront who bears that cost and how long unused material can be held.
5. What Testing is Done, and What Paperwork Comes With Each Batch?
Ask which checks happen before release and whether you receive a certificate or batch record with each lot. If you want additional testing beyond the standard, say so now and confirm who pays for it.
6. How is Shelf Life Supported?
Ask what data stands behind the expiry date printed on your pack. A manufacturer who can explain how shelf life was established is far easier to trust than one who simply states a number.
Questions About Money and Time
7. What Are the Payment Terms, and Can Prices Change?
Look for the advance amount, balance timing, and any conditions on release of goods. Then ask specifically whether raw material price increases can be passed on mid-contract, and how much notice you get if they are.
8. What Timelines are Committed in Writing?
A verbal "about a month" is not a timeline. Ask for stage-wise durations, from sample approval to dispatch, and what happens if a stage runs over. Some agreements include remedies for delay; many don't unless you ask. Also find out who is responsible when the hold-up comes from your side, such as late artwork approval, since delays travel in both directions.
Questions About When Things Go Wrong
9. How Are Defective or Rejected Batches Handled?
Ask who inspects, within what period you must report a problem, and what the remedy is: replacement, credit, or refund. Vague wording here is where disagreements tend to become expensive.
10. How Does the Relationship End?
Find out the notice period, what happens to work in progress, and whether you can move your formula and artwork elsewhere. Nobody signs a contract expecting to leave, which is exactly why the exit clause needs attention while everyone still gets along.
How to Run the Conversation
Sending all ten questions in a single email tends to produce a single vague reply. A better approach is to sit down, either in person or on a call, and go through them in order, taking notes as you go. Follow up in writing the same day, so both sides have the same record of what was said.
Two habits make a real difference. First, ask for examples: "How did the last batch delay get handled?" tells you far more than "Do you handle delays well?" Second, ask the same question of every manufacturer you're considering. Comparing answers side by side shows you which terms are standard and which are unusually favourable, or unusually tight, for you.
It also helps to decide your own priorities before the meeting. If protecting your formula matters most, push harder on ownership and confidentiality. If cash flow is your worry, spend your energy on payment terms and MOQ. You won't win every point, and you don't need to. You do need to know which points you can't give up.
A Short Note Before You Sign
Warning signs are worth watching for as you go through these questions:
- Answers that change depending on who you ask.
- Reluctance to put anything in writing.
- No clear position on formula ownership.
- Timelines given only in loose terms.
A lawyer who has handled manufacturing contracts should read the final draft; this checklist prepares you for that conversation but doesn't replace it.
When you're ready to open the discussion, Alister Life Sciences offers third-party manufacturing, and you can request a quote to start the conversation with the details of your product in front of the team.
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