A Canadian Supplier Agreement is a legally binding contract between a buyer and a supplier that governs the ongoing purchase and sale of goods, materials, or products on a business-to-business (B2B) basis. Unlike a one-time sales contract, a supplier agreement establishes a framework for repeated transactions, covering pricing, quality standards, delivery terms, payment conditions, and the legal obligations of both parties.

Canadian supplier agreements operate under a multi-layered legal framework. The primary legislation governing the sale of goods is the provincial Sale of Goods Act (e.g., Ontario R.S.O. 1990, c. S.1; BC R.S.B.C. 1996, c. 410), which codifies common law principles and implies certain conditions into sale contracts, including that the goods must be of merchantable quality, match their description, and be fit for the buyer’s particular purpose. These implied conditions apply unless explicitly excluded by agreement in commercial transactions.

The Personal Property Security Act (PPSA), enacted in each common law province, governs security interests in personal property. When a supplier retains title to goods until payment, this creates a purchase-money security interest (PMSI). Registering a financing statement under the PPSA gives the supplier the highest possible priority over other secured creditors — a critical protection if the buyer becomes insolvent. The Bankruptcy and Insolvency Act (BIA) further protects unpaid suppliers with a statutory right to repossess goods delivered within 30 days before bankruptcy.

All taxable supplies in Canada are subject to the Goods and Services Tax (GST) at 5% or the Harmonized Sales Tax (HST) at rates ranging from 13% to 15%, depending on the province of delivery. The Excise Tax Act requires suppliers with gross revenue exceeding CAD $30,000 in a 12-month period to register for GST/HST, charge the applicable rate, and remit taxes to the Canada Revenue Agency (CRA). Proper invoicing with GST/HST registration numbers is essential for buyers to claim input tax credits.

When a manufacturing company needs a reliable supply of raw materials, components, or finished products and wants to establish long-term pricing, quality standards, and delivery schedules with a specific supplier.

When a retail business is sourcing inventory from a Canadian or foreign supplier and needs to document the terms of purchase including pricing, payment (Net 30, Net 60, or early payment discounts), and GST/HST treatment.

When a construction or industrial company is procuring specialized materials (structural steel, concrete, electrical components) and needs the goods to conform to Canadian Standards Association (CSA) or other industry specifications, with clear warranty and defect remedies.

When a supplier wants to retain title to goods until payment is received and needs to register a purchase-money security interest (PMSI) under the provincial PPSA to protect against buyer insolvency or competing creditors.

When a buyer needs to require the supplier to maintain product liability insurance, commercial general liability insurance, and other coverages to protect against third-party claims arising from defective goods.

When cross-border or interprovincial supply relationships require clear shipping terms (FOB Destination, FOB Shipping Point, DAP, or EXW) to allocate the risk of loss during transit.

Operating without a written supplier agreement exposes both parties to disputes over pricing, quality, delivery timelines, and risk of loss. In the absence of express terms, the provincial Sale of Goods Act’s default rules apply, which may not reflect the parties’ actual intentions.

Goods Description and Quality Standards — A detailed description of the goods or materials to be supplied, including applicable Canadian Standards Association (CSA) standards, ISO certifications, or other quality specifications. Clear specifications reduce disputes over conformity.

Pricing and GST/HST — The pricing structure (fixed, per-order, or CPI-adjusted), whether prices are inclusive or exclusive of GST/HST, and the supplier’s obligation to include its registration number on invoices. Proper GST/HST treatment is essential for the buyer’s input tax credit claims under the Excise Tax Act.

Payment Terms — When payment is due (Net 15, Net 30, Net 60, or early payment discounts), late payment interest rates (which must not exceed the criminal interest rate under Criminal Code s. 347), and the buyer’s right of set-off against credits for defective goods.

Delivery and Shipping Terms — The delivery location, lead times, shipping terms (FOB Destination, FOB Shipping Point, DAP, EXW), and the consequences of late delivery. These terms determine when title and risk of loss pass between the parties.

Warranty — The warranty period, the supplier’s obligation to repair, replace, or refund defective goods, and the relationship to implied warranties under the applicable provincial Sale of Goods Act.

PPSA Title Retention — Optional retention of title clause creating a purchase-money security interest (PMSI) in favour of the supplier, with consent for PPSA registration. This protects the supplier’s priority if the buyer becomes insolvent.

Term, Renewal, and Termination — The initial contract period, auto-renewal terms, termination for convenience, and immediate termination for material breach or insolvency under the BIA or CCAA.

Indemnification and Liability — The supplier’s obligation to indemnify the buyer for defective goods, personal injury, property damage, and IP infringement, with aggregate liability caps and exclusion of indirect damages.

Insurance — Minimum insurance coverages the supplier must maintain, including commercial general liability, product liability, and automobile liability.

Force Majeure — Allocation of risk for events beyond the parties’ reasonable control, including natural disasters, pandemics, government orders, and supply chain interruptions.