A Supply Contract Nepal is a commercial contract that sets binding terms for supplying specified goods (and sometimes related services) from a supplier to a buyer in Nepal. Its commercial purpose is to convert operational supply expectations—specifications, timelines, price, and remedies—into enforceable obligations under commercial contract law Nepal.
Clear drafting matters because supply relationships typically involve repeat deliveries, changing specifications, and operational dependencies. A well-structured Supply Agreement Nepal reduces ambiguity on “what must be delivered, when, at what price, and what happens if something goes wrong,” which is the core enforceability test in practice.
Common disputes that arise in Nepal supply relationships include:
Quality disputes: non-conforming goods, wrong specifications, hidden defects, counterfeit/grey-market items.
Delay disputes: late delivery, partial delivery without approval, missed project milestones.
Payment disputes: invoice rejection, VAT/tax invoice mismatch, disputed set-off, withheld payment due to defects.
Returns and replacements: unclear rejection windows, dispute over who bears transport cost for returns.
Warranty and liability: mismatch between sales promises and contract wording, unclear defect remedy hierarchy.
A Supply Contract Nepal is a binding agreement that defines the supply scope, specifications, price, delivery, acceptance, and remedies for breach.
Under Contract Act Nepal principles, supply contracts are enforceable when essential terms are clear, parties have capacity/consent, and obligations are lawful and specific.
Core commercial clauses should tightly define specifications, pricing, delivery and acceptance Nepal contract process, and documentation.
Risk allocation should be handled through warranty, liability caps, liquidated damages Nepal (carefully drafted), and termination triggers.
Compliance touchpoints often include VAT/tax invoicing, sector standards/certifications, and import/customs responsibilities for cross-border supply.
Best practice is a written contract with schedules/annexes, purchase order controls, and strong record-keeping (POs, delivery notes, inspection reports).
This content is for general information purposes only and does not constitute legal advice.
Contract enforceability and clause suitability vary by contract type, sector rules, and procurement model.
Professional legal review is recommended before making binding decisions or signing documents.
A supply contract is enforceable in Nepal when it meets the legal requirements for a valid contract and contains sufficiently certain commercial terms. In practical terms, enforceability improves when the contract clearly identifies the parties, scope, price, delivery timelines, acceptance method, and remedies.
Key enforceability principles typically applied under commercial contract law Nepal and Contract Act Nepal concepts include:
Capacity and authority: parties must have legal capacity; companies should sign through authorized signatories (board/agency authorization as relevant).
Free consent: signatures should reflect genuine agreement without coercion, fraud, or misrepresentation.
Lawful object and consideration: the supply must be lawful, and the contract should reflect consideration (price/payment obligations).
Certainty of terms: unclear scope, vague specifications, or open-ended delivery schedules weaken enforceability.
Key enforceability factors for supply contracts (drafting-focused):
Clear scope: exact goods/services, quantities, and permitted substitutes.
Price and taxes: price structure, VAT responsibility, invoice requirements.
Timeline: delivery windows, lead times, and consequences of delay.
Acceptance/rejection: defined inspection period and rejection mechanics.
Remedies: repair/replace/refund, liquidated damages, termination triggers.
Governing law and forum: Nepal law and dispute resolution method should be consistent.
Governing law and jurisdiction concept:
A Nepal-facing supply relationship should state whether Nepal law governs and whether disputes go to Nepal courts or arbitration.
Cross-border supply must avoid conflicts between foreign supplier templates and Nepal enforcement realities (especially evidence, notices, and interim relief).
A supply contract is strongest when it clearly identifies each party’s role and connects day-to-day procurement documents (purchase orders, delivery notes) to the master agreement. A mismatch between operational paperwork and the contract is a common reason disputes escalate.
Key roles:
Supplier: manufactures, distributes, imports, or delivers goods; may provide installation/commissioning.
Buyer: purchases goods for resale, internal use, or project consumption; may be a contractor or project owner.
End-user (if relevant): the party using the goods; may be relevant for warranties, training, commissioning, and acceptance testing.
Common structure models:
Single supply agreement (one-time): suitable for a fixed quantity and defined delivery schedule.
Framework agreement + purchase orders: best for recurring procurement. The framework sets legal terms; each PO controls quantity, pricing, delivery location, and dates.
Rate contract / call-off model: pre-agreed pricing and technical specs with call-off orders over a term.
Schedules/annexes should carry operational detail:
Schedule A: technical specs, SKU list, drawings, spec sheets.
Schedule B: price list, discount structure, revision rules.
Schedule C: delivery plan and delivery documentation templates.
Schedule D: acceptance checklist and testing criteria.
Schedule E: service/warranty terms and spare parts list (if applicable).
Table-style contract architecture (text format):
Master Agreement | Governs legal terms, risk allocation, dispute resolution
Purchase Order | Controls quantity, item code, unit price, delivery date/place
Delivery Note | Proof of delivery; triggers inspection timeline
Invoice + VAT invoice | Payment trigger; tax compliance evidence
Acceptance Report | Confirms acceptance or lists defects/non-conformity
A supply contract is commercially safe only when the scope and specifications are defined so precisely that non-conforming supply can be identified without argument. If the buyer cannot prove what was required, remedies become difficult to enforce.
Drafting requirements for scope:
Item identification: SKU/item code, model, brand, grade, version, batch.
Technical references: drawings, spec sheets, datasheets, approved samples.
Services (if any): installation, commissioning, training, maintenance, calibration.
Quality standards and acceptance benchmarks:
Standards: Nepal Standards (where applicable), international standards (ISO/IEC/ASTM), manufacturer standards.
Tolerances: acceptable variance in weight, dimensions, performance.
Sampling/testing: sample size, method, testing location, retesting rights.
Packaging, labeling, and compliance standards:
Packaging requirements for transport, storage, moisture control, safety.
Labeling requirements: batch/lot, manufacturing date, expiry date, handling instructions.
Traceability: serial numbers, anti-counterfeit features where relevant.
Change control for specs:
Define who can approve changes and how changes affect price/time.
Require written change orders (email/PO amendment) and updated schedules.
Clarify whether “or equivalent” substitutions are permitted, and the approval process.
Table-style scope checklist (text format):
Specification reference | Schedule/PO reference and version number
Approved sample | Storage location and validity period
Permitted substitutes | Approval authority and documentation
Quality testing | Method, location, cost allocation
Packaging/labeling | Minimum requirements and rejection basis
Pricing and invoicing clauses reduce payment disputes by defining how price is calculated and what documents must accompany an invoice. Most payment disputes in supply chains are documentation disputes, not only cash-flow disputes.
Price structure options:
Fixed price: unit price remains constant for the PO/term.
Variable price: linked to a published index, raw material cost, or FX rate.
Tiered pricing: based on volume thresholds.
Discount structure: trade discount, cash discount, rebate conditions.
VAT/tax invoicing responsibilities:
Define whether price is inclusive or exclusive of VAT.
Require valid tax invoices consistent with VAT registration details.
Set documentation: PO number, delivery note number, item description, quantity, unit rate, VAT amount, total.
Currency and exchange risk (cross-border supply):
Specify currency of contract and payment.
Define who bears exchange fluctuation risk and how conversions are done.
Address bank charges, withholding/clearance cost allocation if relevant.
Price revision triggers and documentation:
Define triggers: statutory tax change, index movement beyond threshold, input cost proof.
Require notice period and supporting documents.
State whether revisions apply prospectively only (recommended).
Table-style pricing clause controls (text format):
Price basis | Fixed / indexed / tiered with formula
Tax treatment | VAT inclusive/exclusive; invoice format requirements
FX risk | Allocation + conversion rate source + payment currency
Price revision | Trigger + notice + documentary proof + effective date
Delivery risk must be allocated explicitly because “delivery completed” and “risk transferred” are not always the same event. A well-drafted delivery and acceptance Nepal contract section clarifies delivery location, documentation, and when title/risk move from supplier to buyer.
Delivery place and delivery windows:
Define delivery location precisely (warehouse address/site gate).
Define delivery window (date/time), unloading responsibility, and site access rules.
Define whether partial deliveries are allowed and under what conditions.
Incoterms concept (if used):
If Incoterms are referenced (EXW, FOB, CIF, DDP), specify the Incoterms version and ensure operational capability aligns with it.
For domestic supply, define equivalent responsibilities clearly even without Incoterms.
Title transfer and risk transfer:
Title transfer: when ownership passes (often upon full payment or upon delivery, depending on commercial intent).
Risk transfer: when risk of loss/damage passes (commonly upon delivery at the agreed delivery point, or upon handing over to carrier if buyer arranges transport).
These should not be left implied.
Partial deliveries, backorders, and delivery documentation:
Define whether backorders are permitted and whether buyer can cancel delayed balance.
Require documentation: delivery note, packing list, transport document, batch certificate, quality certificate if applicable.
Define “delivered quantity” measurement method (count/weight).
Import/customs responsibility allocation (cross-border):
Define which party handles import permits, customs clearance, duties, port charges, and compliance certificates.
Clarify timelines impacted by customs delays and documentary responsibilities.
Table-style delivery allocation (text format):
Delivery point | Address + delivery hours + unloading responsibility
Delivery documents | Delivery note + packing list + certificates
Risk transfer | Event-based trigger (e.g., signed delivery note)
Title transfer | Event-based trigger (e.g., payment completion)
Backorders | Allowed/not allowed + cancellation rights
An acceptance clause prevents disputes by defining when goods are deemed accepted and how non-conformance must be reported. Without an acceptance timeline, parties argue indefinitely about whether defects were timely raised.
Acceptance timeline and method:
Set an inspection period starting from delivery or commissioning (as relevant).
Define acceptance method: written acceptance report, deemed acceptance after inspection period, or acceptance after testing.
Inspection standards and test criteria:
Define objective criteria: spec sheet compliance, performance tests, sample testing.
Define whether inspection is visual, functional, laboratory-based, or third-party.
Define whether supplier can be present and retest rights.
Non-conforming goods process:
Define what counts as non-conforming: wrong item, wrong quantity, damaged packaging, expired goods, failure of performance tests.
Define remedies: rejection, replacement, repair, or credit note.
Define return logistics: who arranges pickup, who pays transport, timeline to collect rejected goods.
Record-keeping and evidence:
Require delivery condition photos, sampling reports, test results, batch certificates.
Define notice format (email + official letter) and minimum content (PO number, defect description, evidence attached).
Table-style delivery/acceptance checklist (text format):
Delivery note sign-off | Signature, time, vehicle/waybill details
Initial inspection | Packaging damage, count, visible defects
Technical inspection | Specs/testing within stated timeline
Rejection notice | Written notice + evidence + remedy demand
Replacement window | Clear days for supplier to replace/collect
Payment risk is best controlled by linking payment triggers to objective documents and using proportionate security where exposure is high. Overly rigid payment terms can also disrupt supply continuity, so the clause should balance working capital realities.
Common payment structures:
Advance payment: define percentage, timing, and security (if large advance).
Milestone payment: tied to delivery lots, commissioning, or acceptance.
Cash on delivery (COD): payment upon delivery against documents.
Credit period: net 7/15/30/60 days from invoice date or acceptance date.
Late payment interest concept:
If interest is included, define rate, calculation method, and when it begins.
Draft carefully to avoid ambiguity and ensure the rate is commercially reasonable and enforceable.
Security options (conceptual) to reduce payment/default risk:
Bank guarantee: performance security or advance payment guarantee.
Letter of credit (LC): bank-backed payment mechanism for cross-border supply.
Retention: buyer withholds a percentage until final acceptance/warranty period milestone.
Escrow: third-party holds funds until delivery/acceptance conditions are met (requires practical availability).
Post-dated cheques: used in practice; should be aligned with contract remedies and compliance.
Set-off rights and dispute holds:
Define whether buyer can set off amounts for defects/delay.
Define whether supplier can suspend supply if payments are overdue.
Define “undisputed amount” payment obligation even if part is disputed.
Payment security options (table-style text):
LC | Strong for cross-border; requires bank process and documentary compliance
Bank guarantee | Suitable for advance/performance; costs and validity must be managed
Retention | Useful where acceptance is staged; define release conditions
Escrow | Strong control but operationally complex; define release triggers
Credit insurance (where available) | Risk transfer tool; depends on market availability
A warranty clause should clearly state what is warranted, for how long, and what remedy applies first. Warranty disputes often arise because marketing statements or invoices are treated as warranties without a clear contract hierarchy.
Warranty scope and period:
Define whether warranty covers materials, workmanship, performance, and compliance with specs.
Define warranty start date: delivery date, acceptance date, or commissioning date.
Define warranty duration and whether it renews for replaced parts.
Remedy hierarchy:
Recommended hierarchy: repair → replacement → refund/credit.
Define timelines for each remedy and escalation if supplier fails to act.
Exclusions and misuse handling:
Exclude defects caused by improper storage, misuse, unauthorized modification, or force majeure impacts.
Define buyer obligations: proper handling, maintenance, and reporting.
Service levels and spare parts (if applicable):
Define response time, site visit timelines, remote support, and spare parts availability.
Define whether spare parts are included, discounted, or separately charged.
Define training/operation manuals delivery obligations.
Table-style warranty controls (text format):
Warranty coverage | Specs compliance + performance + materials/workmanship
Warranty period | Defined start trigger + duration
Remedy order | Repair then replace then refund
Exclusions | Misuse, improper storage, unauthorized repairs
Support | SLA response times + spare parts commitments
Delay remedies must be drafted as a genuine pre-estimate of loss and linked to measurable delay events, not as a vague punishment. In Nepal supply contracts, the phrase penalty clause Nepal contract is commonly used in business practice, but enforceability improves when the clause is structured as liquidated damages Nepal tied to objective delay and loss allocation logic.
Delay damages vs penalty concept (drafting caution):
Define the delay event: missed delivery date, missed acceptance milestone, or missed call-off lead time.
Define the rate: per day/week, capped at a percentage of affected goods value.
Define whether damages are the exclusive remedy for delay or additional remedies apply for prolonged delay.
Caps on liability and excluded losses:
Set a liability cap aligned with contract value and risk profile.
Exclude indirect or consequential losses where appropriate (loss of profit, business interruption), while preserving core claims (e.g., fraud, willful misconduct) as per negotiated positions.
Ensure exclusions do not contradict mandatory responsibilities in regulated products.
Indemnities:
Product liability claims (where goods cause harm/damage).
IP infringement indemnity (for branded/technology goods).
Third-party claims due to counterfeit goods, regulatory breach, or unauthorized labeling.
Insurance requirements (where relevant):
Cargo insurance allocation when transport risk is significant.
Product liability insurance for high-risk goods.
Professional/contractor insurance if services like installation are included.
Table-style liability framework (text format):
Delay LD | Rate + start trigger + cap + evidence of delay measurement
Liability cap | Aggregate cap per contract/PO
Excluded losses | Indirect/consequential categories
Indemnities | Product liability + IP + third-party claims
Insurance | Cargo/product liability as appropriate
A compliance clause protects both parties by tying supply obligations to applicable regulatory standards and ethical procurement expectations. The clause should be sector-specific and should not rely on generic statements that cannot be audited.
Product standards, certifications, and labeling:
Require compliance with applicable Nepal standards, sector regulations, and labeling requirements.
Require submission of certificates: conformity, test reports, batch/lot certificates where applicable.
Define right to audit or verify authenticity for high-risk goods.
Anti-counterfeit and traceability:
Require authorized distribution channels where brand integrity matters.
Define traceability: serial numbers, batch tracking, recall cooperation.
Define consequences: immediate rejection, indemnity, termination for counterfeit supply.
Data handling (if customer data is involved):
If the supplier receives customer contact details, site data, or usage data, define permitted use, confidentiality, and security measures.
Define breach notice responsibilities and data deletion upon termination.
Anti-bribery and conflict-of-interest (optional but recommended):
Prohibit improper payments, facilitation payments, and undisclosed conflicts.
Require disclosure if supplier representatives have relationships with buyer staff influencing procurement decisions.
Define termination for serious compliance breach.
Table-style compliance controls (text format):
Standards | Certifications + testing + labeling obligations
Authenticity | Anti-counterfeit warranties + audit rights
Data | Limited purpose use + security + deletion
Ethics | Anti-bribery + conflict disclosure + breach remedies
Termination clauses should define clear triggers, notice steps, and post-termination cleanup obligations so that supply disruption is managed legally and operationally. Suspension rights are often more commercially useful than immediate termination for payment or compliance issues.
Term and renewal mechanics:
Define initial term and whether renewal is automatic or by written agreement.
For framework agreements, define whether prices and specs renew or require an updated schedule.
Termination for cause vs convenience:
For cause triggers typically include: material breach, repeated non-conformance, insolvency, counterfeit supply, serious compliance breach.
For convenience (if used) should require notice and settlement rules (completed goods, committed purchase materials, cancellation fees if negotiated).
Suspension rights:
Supplier suspension for non-payment: define overdue days, notice, and obligation to supply undisputed amounts.
Buyer suspension for compliance breach or safety concerns: define immediate suspension for urgent risk.
Post-termination obligations:
Return/retrieval of rejected goods and branding material.
Final invoice reconciliation and credit note issuance.
Warranty continuation for already delivered goods (as negotiated).
Confidentiality survival and IP/branding restrictions.
Transition support where supply is critical.
Table-style exit framework (text format):
Cause termination | Breach types + cure period + immediate termination events
Convenience termination | Notice period + settlement logic
Suspension | Trigger + notice + restart conditions
Post-termination | Returns, final settlement, confidentiality, warranty survival
Dispute clauses are effective when they control notices, escalation timelines, forum, and evidence preservation from day one. Most supply disputes are won or lost on documents: POs, delivery notes, inspection records, and invoice trails.
Nepal courts vs arbitration (overview):
Nepal courts: suitable when parties want judicial process and enforceability within Nepal; timelines and procedural steps should be considered.
Arbitration: useful for commercial disputes requiring confidentiality and specialized decision-making; the clause must be properly drafted (seat, rules, number of arbitrators, language).
Notice requirements and escalation:
Define notice addresses (email + physical address) and deemed receipt rules.
Add escalation steps: contract manager → senior management → mediation/arbitration/court.
Define time bars for claims where appropriate (especially for acceptance and warranty notices).
Evidence checklist for supply disputes:
Signed framework agreement + schedules and amendments.
Purchase orders and PO acknowledgements.
Delivery notes, waybills, gate entry records.
Inspection reports, test results, photos, sampling logs.
Invoices, VAT invoices, payment receipts, bank advices.
Replacement/repair correspondence and credit notes.
Meeting minutes and formal notices.
Table-style evidence strategy (text format):
Contract set | Master agreement + schedules + PO hierarchy clause
Delivery proof | Delivery note + transport docs + photo evidence
Quality proof | Test reports + sampling logs + rejection notice
Payment proof | VAT invoice + bank receipt + reconciliation
Notice trail | Emails + courier receipts + escalation records
Legal support adds value when it aligns supply operations with enforceable contract structure and sector compliance obligations. Supply relationships benefit from preventive legal design that reduces ambiguity and improves evidence readiness.
Typical legal support areas:
Drafting and negotiation support: aligning master agreement, schedules, and PO terms; removing contradictions; ensuring remedies are workable.
Risk mapping and compliance alignment: identifying product risk categories, import/customs issues, warranty exposure, and liability allocation.
Contract management templates and SOPs: PO templates, delivery/acceptance checklists, notice templates, change order workflows.
Dispute prevention and resolution support: structured notice strategy, evidence collation, settlement positioning, arbitration/court documentation readiness.
A written supply contract is generally enforceable if valid contract requirements are met and terms are clear. Stamp and execution practices can affect evidentiary strength and compliance in specific contexts, so proper execution is recommended.
Essential clauses include scope/specifications, price and taxes, delivery terms, acceptance process, payment terms, warranties, remedies for delay/defects, liability allocation, termination, and dispute resolution.
A PO can be binding if it clearly shows offer and acceptance and matches the agreed master terms. A framework agreement should state how PO acceptance occurs and which terms prevail in conflict.
Delay damages should be tied to a specific delivery milestone, calculated per day/week, and capped. Wording should reflect a genuine pre-estimate of loss rather than a vague penalty.
Liquidated damages are structured as an agreed estimate of loss for a defined breach, improving enforceability. A punitive “penalty” framing can invite disputes on reasonableness and intent, so careful drafting is preferred.
Risk allocation depends on the contract’s risk transfer point. The delivery clause should state whether risk passes at handover to carrier, at delivery site, or upon acceptance.
A practical acceptance period depends on the goods type and testing needs, commonly a defined number of days after delivery or commissioning. The contract should include deemed acceptance rules and exceptions for hidden defects.
A delivery note typically confirms receipt, not necessarily technical acceptance. The contract should separate “delivery receipt” from “acceptance” and preserve inspection/rejection rights within the inspection period.
Suspension can be permitted if the contract states overdue thresholds, notice requirements, and restart conditions. The clause should also address payment of undisputed amounts during disputes.
Arbitration can be suitable for confidentiality and commercial expertise; courts can be suitable for local enforcement and certain interim remedies. The right choice depends on transaction value, urgency, and enforcement strategy.
A clear remedy hierarchy—repair, replacement, then refund/credit—reduces disputes. The clause should include timelines, exclusions, and who bears logistics costs for warranty returns.
The most important documents are the signed contract and schedules, PO/acknowledgement, delivery notes, inspection/test reports, invoices/VAT invoices, payment records, and formal notices.
A limitation clause can exclude indirect or consequential losses if drafted clearly and aligned with the risk profile. The clause should also define the liability cap and preserve agreed carve-outs where required.
Price revision should be conditional on defined triggers (tax change, index movement), supported by documentation, and applied prospectively. Uncontrolled “market price” clauses often cause disputes.
Use a written change order process with updated schedules, pricing/time impact confirmation, and version control. The contract should state that verbal changes are not binding unless documented.
Witnessing/notarization is not always mandatory for commercial enforceability, but proper execution can strengthen evidence and reduce disputes. Execution format should match company authority and transaction risk.
February 26, 2026 - BY Admin