Review the role of supply contracts within your business

The recent change in Corona supplier will affect a large number of licensees.  Potentially it may even result in some venues losing their ability to stock any Corona for a while.

Different licensees may find themselves facing different consequences, depending on the particular contractual terms of their supply agreements.  It is important that licensees carefully review their supply contracts to ascertain what their position is.

In some situations it may be possible for licensees to negotiate to vary the terms of their supply contracts.  This will not necessarily be possible for all licensees.  Two key issues to consider will be the following:

• What is the nature of the obligation to supply by the supplier in terms of the specified product?  In other words, is the supplier contractually obliged to supply Corona specifically?
  
  
• Is there scope within the agreement for the licensee to source Corona from another supplier?

This matter acts as a timely reminder to licensees of the role and importance of supply contracts within their businesses and the need to be cautious when agreeing to enter into supply arrangements.  Licensees should endeavour to put mechanisms in place to minimise the risk associated with a loss or diminution of supply.

Licensees should always carefully read any contract before entering into it.  This is necessary to ensure the terms of the contract are fully understood.  After that they should re-read the contract from time to time to maintain that understanding and awareness.  When necessary, legal advice on the terms of any contract should be sought and obtained.

Taking a prudent, diligent and fully informed approach to entering into all contracts associated with the business will help to reduce adverse impacts on the business should any problem arise.

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