A supplier contract review checklist for a Canadian business purchase covers exclusivity and pricing terms, personal guarantees the current owner may have given, anti-assignment clauses, and how dependent the business is on relationships that live with the owner personally rather than with the company — the terms that determine whether supply keeps flowing on the same terms after closing.
Reviewed
A supplier who can walk away, raise prices sharply or refuse to deal with a new owner at all is a risk that rarely shows up clearly in a financial statement. This checklist covers the supplier side of the contract book specifically, as a companion to the customer contract review checklist, since the two carry different risks even though a buyer often reviews them together.
Confirm which supplier agreements actually transfer
Read the assignment clause in every material supplier agreement and confirm what consent, if any, is required to keep supply flowing after closingA supplier agreement that requires consent to assign, on a deal structured as an asset purchase, can lapse entirely if that consent is never actually sought and obtained before closing.
Ask whether any supplier agreement is personally guaranteed by the current owner, and how that guarantee gets released or replacedA personal guarantee tied to the outgoing owner does not disappear automatically at closing, and a seller who has not raised it with the supplier can find themselves still on the hook for a business they no longer control.
Confirm whether key supplier relationships are documented in a written agreement at all, or run informally on the strength of the owner’s personal relationshipAn informal arrangement that has worked well for years under one owner is not the same commitment to a new one, and a buyer should treat undocumented pricing or terms as something to renegotiate, not something guaranteed to continue.
Review pricing, exclusivity and volume terms
Confirm whether any supplier agreement includes exclusivity, restricting the business from sourcing the same goods elsewhereAn exclusive supply arrangement can work in a buyer’s favour if pricing is genuinely competitive, but it can also lock the business into a supplier it would otherwise want to shop against, and a buyer should know which situation this actually is.
Check whether pricing is fixed, tied to an index, or subject to unilateral increase, and confirm the remaining term of any favourable rateA favourable rate that is about to expire changes the margin picture for a buyer far more than the same rate locked in for several more years, and it is worth confirming precisely, not assuming it continues indefinitely.
Ask about minimum purchase commitments and what penalty applies if the business does not meet themA minimum-purchase obligation inherited without being flagged can turn into an unexpected cost if the new owner plans to change suppliers, scale down a product line, or run leaner inventory than the seller did.
Check for concentration and continuity risk
Calculate what share of purchasing runs through the largest few suppliers, and ask what backup exists if one of them is lostA business with a single-source supplier and no documented alternative is one supply disruption away from an operational crisis, and that risk is worth pricing into the deal rather than discovering the first time a shipment does not arrive.
Confirm whether any supplier agreement contains a change-of-control clause that could be triggered by the saleA change-of-control clause lets a supplier exit or renegotiate specifically because ownership changed, even where nothing about how the business actually operates is different, and it is easy to overlook because the operations look unaffected.
Review the payment terms and history for each key supplier, including whether any account is currently past dueA supplier relationship strained by late payments is a different kind of risk than a healthy one, and a new owner inherits whatever goodwill, or lack of it, the seller has built up with that account.
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