Key Issues That Every Contract Assembly Agreement Should Address

Signing a contract with an assembly company is like entering a long-term relationship. It’s important to be on the same page from the get go. Otherwise, you may face costly mistakes that may affect your company’s reputation.

The best way is to draft up an ironclad contract assembly agreement. You want the agreement to cover all the bases. That’s the best way to ensure that:

• Your relationship with the contract assembly company goes as smoothly as possible
• You won’t run into any costly errors
• The contract assembly company will meet all your expectations from day one

A contract assembly agreement is a lengthy and important document. It’s important to get it right the first time. The best way to ensure that the agreement is ironclad is to cover the following key issues:

1. Materials

If the company is going to assemble parts for you, they’re most likely going to use bonding materials. For example, the filler material used in controlled atmosphere brazing. The quality of these materials is quite important. You want strong materials that will hold your parts together, after all.

If the assembly company has a solid understanding of what materials you want in your parts, they will:

• Meet your quality standards
• Reduce the risk of product defects
• Reduce the risk of recalls

A good way to go about this is to include a comprehensive bill of materials in the agreement.

2. Pricing

Every good contract assembly agreement includes unit pricing information. That’s not enough, though. You need detailed pricing provisions too. Without detailed pricing provisions, you may face unexpected price adjustments in the future.

Consider asking for:

• If you may get a fixed price for a certain amount of time
• If the manufacturer is IATF 16949:2016 and ISO 9001:2015 certified, and has an in-house Quality Assurance Program that works continuously to reduce costs
• Another way to reduce your long term costs

Also, be sure to address:

• Fluctuations in commodity pricing
• Fluctuations in transport pricing

You want to set all the prices in stone. That way, you’ll get to avoid surprise expenses or any future complications.

3. Quality Control Procedures

Assembling parts is a big job. That’s why you should have high quality standards and make sure that the company adheres to them. To ensure that the company is on the same page as you are when it comes to quality, include these in the agreement:

• All the quality control procedures you want them to perform
• All the inspection procedures you want them to perform
• Detailed product specifications
• Detailed packaging specifications (if applicable)
• An agreement to warranty your parts against product defects

4. Intellectual Property

This is a very important part of the agreement. By having the company partake in the production of your part(s), you’re trusting them with your intellectual property. You should always make sure the agreement protects your design and trade secrets.

In the agreement, make sure that the contract assembly company:

• Understands the intellectual property laws in your country
• Understands the intellectual property laws in their own country
• Won’t use or leak your design and trade secrets

The intellectual property laws in Mexico are like those in the US. Contract assembly companies in Mexico likely understand the repercussions of stealing proprietary information. It’s one of the many advantages of contracting with a Mexican manufacturer. The desire to protect intellectual property is one factor driving many companies to on-shoring. Mexico’s strong IP laws are one reason why nearshoring is a viable option to onshoring. 

At Intran, we offer comprehensive contract assembly services. We also work with all our clients on drafting up ironclad agreements that benefit everyone involved. Read more about our contract assembly services here.