Paul de Vince

This Practice Note assists with the review and/or negotiation of a drop ship agreement and accompanies Precedents: Drop ship agreement—pro-customer (merchant) and Drop ship agreement—pro-supplier. Drop shipping is a term that is often applied loosely to cover a variety of supply chain models and theoretically can arise at various different points in the supply chain eg manufacturer to distributor, distributor to merchant or manufacturer to merchant. However, common to all these models is the concept that it is an arrangement which allows a merchant to operate free from stock holding constraints by leaving the physical stock holding and supply arrangements to be managed by a third-party, usually the manufacturer of the goods.

This Practice Note assists with the review and/or negotiation of a warehousing and transport services agreement. It is intended for use by a lawyer who is representing the customer. It is implicit in much of this Practice Note, reflecting the commercial reality of many of these deals, that the warehousing and transport services agreement at issue has been drafted by the supplier and is biased in its favour. For a precedent with pro-customer bias, see Precedent: Supply of warehousing and transport services agreement—pro-customer.

This Precedent drop ship agreement is for a transaction involving a supplier (in this case the manufacturer of the goods) and its customer (in this case, a retail merchant) . It assumes that the merchant will separately be trading directly with consumers, or the end-users of the goods. This Precedent has been drafted with a bias in favour of the customer. Drop shipping can arise at different points in the supply chain eg manufacturer to distributor, distributor to merchant or manufacturer to merchant. A drop ship agreement is an agreement for the supply of goods on terms which allow a merchant to operate free from stock holding constraints by leaving the physical stock holding and supply arrangements to be managed by a third party, in this case the supplier or manufacturer of the goods.