In international procurement, life science companies frequently rely on "framework" or "master" supply agreements (MSAs) to set uniform terms and conditions for their overall supply arrangement and each transaction made under the agreement. Although setting up a single MSA to cover a supply relationship may seem straightforward in theory, its implementation often becomes difficult due to the operational realities and organizational structures inherent to pharmaceutical companies. Specifically, MSAs are usually negotiated and signed by a parent company, whereas the actual purchasing orders are often issued by local subsidiaries or country organizations within the group.

This arrangement can lead to complications if purchasing entities are not fully aware of the MSA's provisions, or if they deviate from the agreed terms when placing purchase orders. Such deviation may occur if a purchaser introduces their own standard terms and conditions. Those can undermine the purpose of an MSA, which is to create a set of uniform terms and conditions. In the event of a dispute, the parties may first need to resolve which terms and conditions are applicable and determine the appropriate forum for resolving their disagreement.

A recent decision by the German Supreme Court provides more legal clarity, holding that, as a matter of German law, a centrally and individually negotiated agreement in an MSA may constitute an individual agreement vis-à-vis third-party beneficiary purchasers, and thus take precedence over conflicting terms and conditions introduced by the purchasers. According to the German Supreme Court, this occurs when the interests of the purchasers were duly considered during the negotiations of the MSA, because the purchasers' interests were represented by the parent company speaking with "one voice" during contract negotiations.

Against that background, the following precautions should be taken when negotiating and implementing an MSA to the benefit of separate purchasers:

1. Clearly define the MSA's scope: When preparing the MSA, the roles of the contract-making and purchasing entities should be clearly defined. Ideally, the contract should clearly state that the purchasing entities relying on the terms of the agreement qualify as third-party beneficiaries entitled to enter into separate purchases under the agreement. The MSA should further state that any purchase orders placed under the agreement are subject to the uniform terms and conditions as agreed in the MSA.

2. Avoid deviations from the side of the purchasers: In many cases, the MSA will include certain formal requirements regarding the placement of purchase orders under the agreement. It is advisable to clearly communicate those requirements to the purchasers and ensure their compliance. Purchasers should avoid using site-specific terms and conditions, which could potentially conflict with the terms and conditions set out in the MSA. No additional terms and conditions should be introduced during the MSA's duration unless they are carefully coordinated with the parent company.