Custom Bag Contract Basics: The 10 Clauses That Matter

What a Bag Contract Is Actually For

Most creators think a contract is a record of the deal, and they are right in the sense that it is. They are wrong about why it matters. A record of the deal is useful only when the two sides disagree about what the deal was, and the disagreements that matter in bag sourcing follow a predictable pattern. There are four of them, and a contract is worth writing for the four.

Notice that three of those four are not disputes about intent. In most sourcing disagreements both sides believe they are right, because they are working from different documents or from no document at all. A contract that records one specification, one revision number, one date basis and one standard removes the ambiguity that produces the argument, and it does it before there is anything to argue about.

The fourth is different in kind, and it is the one that outlasts the order. A pattern developed for your product, and artwork created for your campaign, are assets. Who owns them, and what can be done with them after your order ends, is a question that should be answered while you are still negotiating rather than after you have seen a similar product on someone else's page.

There is a fifth thing a contract does that is less obvious and equally useful, which is that it records the things both sides would otherwise assume. A tolerance that is never stated will be assumed. A lead time basis that is never stated will be assumed. An inspection level that is never stated will be assumed. In each case the assumption will be the one that suits the party making it, and in each case the contract is the cheaper place to settle it.

A practical note on form. A bag contract does not need to be long, and it does not need to be drafted by a lawyer to be effective. Ten clauses, each a short paragraph, with the specification and the approved sample photographs attached as exhibits, will handle the four disagreements above. Length is not protection. Specificity is. Our Bag Production Partner for Campaign Creators page places this inside a full sourcing programme.

Clause 1: The Specification and Its Revision Number

The specification clause is the most important clause in the document, and it is the one that makes the other nine usable. It does not describe the product. It points at a document that describes the product, and it names the revision of that document. Everything else in the contract refers back to it.

1. Product type and dimensions in centimetres, with the capacity stated and a tolerance on each main dimension.
2. Quantity per style and per colourway, with the 500 pcs minimum stated for each.
3. Shell, lining and base materials by denier, weave and coating, not by category or trade name.
4. Hardware and closures by type and gauge, and by brand where a brand was specified.
5. Features and pockets, listed individually, so each can be verified at inspection.
6. Decoration by method, position, size in centimetres and number of colours.
7. Colours as Pantone TCX references, with a stated acceptable deviation.
8. Packaging and labelling, including the polybag, the carton, the carton mark and any compliance labelling.

The third item is where most specification clauses fail. Polyester is not a specification. Six hundred denier polyester with a polyurethane coating, in a stated twill or plain weave, with a stated finish, is a specification. The difference matters because the two descriptions cover a range of fabrics whose prices differ by several dollars a unit, and because a contract that permits any of them permits a substitution you did not agree to.

The seventh item has the same problem. A Pantone reference is not sufficient on its own, because dyeing fabric to a reference involves a tolerance, and the tolerance has to be stated in the document rather than remembered. The usual practical approach is a lab dip approved physically, referenced in the clause, with a stated acceptable deviation measured against it. Our Custom Bag Colour Matching: Pantone, Lab Dips, Dye Lots page covers the mechanism.

The revision number is the part creators most often skip and the part that makes the clause work. A specification changes during sampling, and it will be revised two or three times. A contract that says the specification without saying revision 2, dated and attached, is referring to an unknowable document. Name the revision, attach it, and make every later change a new revision number rather than an email about the same one.

There is one more element worth attaching, which is the photographs of the approved physical sample. The specification describes the product in words and the photographs show what those words produced. Together they are the reference the bulk is inspected against, and together they resolve the first disagreement in the table above in a single page. If your contract has only one exhibit, it should be this one.

Clause 2: Quantity, Price and the One-Off Charges

The commercial clause has to do three things: state the quantity the price applies to, separate the unit price from the one-off charges, and say what happens at a different quantity. All three are short, and leaving any of them out leaves an opening that will be used.

The second row is the one that costs money at the 500-piece end. One-off charges on a mid-grade programme typically total USD 970 to 2,000 across pattern development, sampling, digitising, print screens, a custom pull die and label setup. At 500 pcs that is USD 1.50 to 3.50 per unit. Whether they appear inside the unit price or beside it does not change what you pay, and it is worth being explicit about which way they are being treated.

The third row is the one that protects the stretch goal. Most funded campaigns need a second production round, and the second round is where a renegotiation will happen if the price was not fixed in the first contract. Two lines are enough: the price at the next quantity tier, and a statement that pattern, sampling and digitising charges do not recur. Our Bag Re-orders: How Stretch Goals Change Your MOQ page covers the timing of the second round.

There is a fourth line worth adding, which is the price validity period. Material costs move, and a quotation given in one quarter is not necessarily a quotation available three months later. A clause stating that the price holds for a stated period, typically 30 to 90 days, protects you against a requote and protects the partner against a material move they did not cause. It is a fair clause and it is easy to agree.

Clause 3: Payment Terms in Practice

The standard arrangement in this trade is T/T 30/70: a 30 per cent deposit to start and the remaining 70 per cent before shipment. There is a functional reason for the split, and understanding it tells you why the sequence matters as much as the percentages.

The deposit exists to release the material purchasing. Fabric, trim and hardware have to be bought and delivered before cutting can start, and no programme will buy 500 sets of materials for an order that might not happen. The 30 per cent is the commitment that makes the purchase safe to make. This is also why a late deposit is not a late payment but a late start: the material delivery is the first thing the 35 to 50 day bulk window depends on, and it does not begin until the money lands.

The balance exists to protect the buyer, and it works because of where it falls due. Because 70 per cent is payable before shipment but after the inspection, the inspection has consequences. A lot that fails AQL 2.5 can still be reworked while the goods sit on the production side and the balance is unpaid. That is the mechanism, and it is why the clause should state the sequence explicitly: inspection, then the balance, then shipment.

• State the two percentages and the currency. Thirty per cent on order confirmation, seventy per cent before shipment, in a named currency.
• State the sequence. Inspection first, then the balance, then the handover. The order of those three is the whole point of the clause.
• State who bears the bank charges. Telegraphic transfer charges fall at both ends plus an intermediary, and they are not trivial on a 500-piece order.
• State what the deposit is for. Materials purchasing, so that a refund discussion has something to refer to.
• State the transfer-clearing allowance. International transfers are not always same-day, and a day or two of clearing is normal.

There are two variations to be careful with. A deposit above 50 per cent is a request for working capital rather than a commitment mechanism, and it should be questioned, because it moves the financing of the production onto the creator for the whole window. A request for the balance before inspection, which sometimes appears as a request to speed things up, removes the only leverage the inspection has. Both are reasonable to refuse.

There is a practical point about timing that belongs in the clause rather than in an email. Arrange the transfer several days before it is needed and tell your coordinator when it has been sent. A two-day delay in a bank transfer becomes a two-day delay in the order, and it is the cheapest delay in this whole article to avoid. Our Custom Bag Order Process: Quote, Sample, Deposit, Production page shows where the deposit sits in the sequence.

Clause 4: Delivery Terms and the Handover Point

The delivery terms clause says where the goods are handed over, and it determines which costs and which risks sit with whom at every point after that. There are three arrangements in common use, and the differences between them are entirely about how much of the journey is included.

The handover point matters for a reason that is easy to miss. Under FOB Xiamen, risk passes at the port, which means that if goods are damaged in transit the loss falls on whoever arranged the transit. That is a clean allocation and it is why FOB is the natural default for a comparison: it isolates the production decision from the logistics decision, and it lets you arrange the freight with a party whose business is freight.

There is a related point about the documents that accompany the handover. A shipment needs a commercial invoice, a packing list, and any certificates of origin or compliance documents your destination requires. The contract should say which documents are provided, in what form, and how long after the balance they arrive. Missing documentation holds a shipment at a border as effectively as a missing payment holds it at the port.

For a crowdfunding campaign there is one more consideration, which is the backer. If you ship DDP, no backer receives a customs bill. If you ship on FOB or CIF terms and then post individual parcels, the customs handling may fall on the backer, and that produces the support tickets and the refund requests. This is a campaign decision rather than a contract one, but it belongs in the same conversation. Our Kickstarter Freight Options: FOB vs CIF vs DDP page works through the choice.

Clause 5: Lead Time Stated as a Range

A lead time clause that states a single date is a clause that will be breached, because the variables genuinely move the outcome. The clause should state two ranges and one basis, and it should name the production slot. Three lines, and they convert a hope into a schedule.

1. The sampling range, stated as 6 to 10 working days for a standard build and 12 to 15 working days for a complex one.
2. The bulk range, stated as 35 to 50 days, with the start condition named.
3. The start condition, meaning that the bulk window begins when materials are received and checked and the production slot opens, not when the deposit is sent.
4. The slot, named in the contract where possible, with the completion date that follows from it.

The third item is the one that prevents the most arguments, because the gap between deposit and production start can be two weeks and it is nobody's fault. An order confirmed in the week before a production peak can wait for a slot with everything else ready. Stating the start condition in the contract means both sides are measuring the same interval, and it means the completion date has a defensible basis.

There is a question of what happens when the range is exceeded, and it should be answered in the clause rather than after it. The common arrangements are a stated penalty per week of delay, a partial credit against the balance, or a right to cancel and receive the deposit back. The first two are workable and the third is rarely agreed, because the materials will already have been bought.

A penalty clause is worth asking for, and it is worth understanding what it will and will not do. One to two per cent of the order value per week of delay, capped at 5 to 10 per cent, is a typical formulation. Its purpose is not compensation, which will be small. Its purpose is to make the schedule a contractual obligation rather than an intention, and that changes how it is treated on the other side.

Clause 6: The Inspection Clause and Its Numbers

The inspection clause is the one where specificity is easiest and most valuable, because the standard has numbers in it and numbers can be written down. A clause that says inspected to AQL 2.5 is incomplete. A clause that names the sample size, the accept number, the reject number and the report format is usable.

The third row is the one worth understanding, because it determines what happens on the day. At AQL 2.5 on a 500-piece lot, 50 units are drawn at random. If 3 or fewer major defects are found the lot passes. If 4 or more are found the whole lot is rejected, not the 50 units inspected. That is the mechanism of acceptance sampling, and a clause that names the numbers makes the outcome predictable for both sides.

The fourth row prevents an argument that otherwise always happens, which is whether a particular fault is major or minor. A written classification, agreed before the inspection, removes the negotiation from the inspection day. It does not have to be elaborate: a short list naming the common faults and their classification, such as a broken stitch at a stress point as major and a loose thread as minor.

The sixth row is the one that makes the report useful after the order. A report that says pass tells you nothing you can use next time. A report with the defect counts by category and photographs tells you what to tighten on the re-order, and it is the document to ask for. Our Bag QC for Kickstarter: AQL 2.5 Explained page sets out what the inspector looks at, and Kickstarter Bag QC Reports: Read One in 10 Minutes covers reading the result.

Clause 7: The Remedy Clause Nobody Writes

The remedy clause is the most valuable clause in the contract and the one most often absent. It answers the question that every other clause raises and none of them resolves: what happens if the lot fails inspection. Without it, a failed inspection becomes a negotiation conducted while the goods sit on the production side and the campaign has a delivery date.

The clause should name one of those as the default, name a time limit for it, and say who bears the cost. A single sentence is enough: where a lot fails the agreed inspection standard, the defective units will be reworked at the production side's cost and reinspected within 10 working days, with a credit against the balance available at the buyer's election if the rework cannot be completed in that time.

There is a second sentence worth adding, which covers the case where the rework also fails. The usual arrangement is a credit against the balance, and it is worth stating, because the alternative is a discussion about a second rework while the campaign is waiting. A clause that anticipates the second failure prevents it becoming a surprise.

One caution about how the clause is used. A remedy clause is not a negotiating lever to be used for a better price, and treating it that way will damage the relationship it is meant to protect. It is there for the day when something has genuinely gone wrong, and its value on that day is that nobody has to discuss what happens next. Agree it while things are going well, and then do not mention it again.

Clause 8: Intellectual Property and Pattern Ownership

The IP clause protects two different assets, and they need two different sentences. The first is your brand, meaning the logo, the artwork and any campaign imagery applied to the product. The second is the pattern, meaning the cutting pattern and the construction method developed to make your product.

• Your artwork and logo should be acknowledged as yours, and their use restricted to your orders.
• The pattern is a separate asset, and its ownership should be stated rather than assumed.
• The moulds and tooling, where you paid for them, should be stated as yours and not usable for another customer.
• The photographs of your product should not be usable in anyone's marketing without your consent.
• The duration should be stated, because a perpetual restriction is easier to agree than a temporary one with an end date to argue about.

The second item is the one where creators have the least clarity and the most at stake. A pattern developed for a specific product is a real asset, and in the absence of a clause its ownership follows local custom rather than your expectation. If your product involved genuine development work and you intend to re-order, make the position explicit: the pattern was developed for you, it is held for your orders, and it will not be used to make a substantially similar product for another customer.

The third item is easy to agree if you raise it at the right moment, which is when you are paying for the tooling. A custom zipper pull die at USD 300 to 900, or an injection mould at USD 3,000 to 8,000, is a physical asset. If you paid for it, say so in the contract, and say where it is held and for whose orders it can be used. It is a short sentence and it is the difference between an asset and a gift.

There is a practical caveat that makes the clause easier to agree and more likely to be honoured. Standard components and existing patterns are not yours, and a clause that tries to claim them will be resisted. What is worth protecting is the specific development done for your product, and framing it that way gets the clause agreed without a fight. Our Custom Bag CAD Development: Sketch to Sample page covers where the development work happens.

Clause 9: Liability, Warranty and Practical Limits

The liability clause sets the ceiling on what can be recovered if something goes wrong after the goods have shipped, and it is the clause most likely to arrive in a partner's standard terms with a number in it that you did not negotiate. It is worth reading, because the number matters and it is negotiable.

1. The cap. Most agreements cap liability at the value of the order. That is a reasonable position and it is the usual outcome.
2. The warranty period. A period during which defects present at delivery will be remedied, commonly 30 to 90 days after receipt.
3. The claim window. The time you have to report a defect after discovering it, commonly 7 to 30 days.
4. The scope of the warranty. Whether it covers materials and workmanship only, or extends to fitness for a stated purpose.
5. The exclusion of consequential loss. Usually excluded, and it is the exclusion to understand before signing.

The fifth item is the one to read carefully. Consequential loss covers the knock-on costs: the replacement shipment, the refunds to backers, the campaign damage. In most supply agreements it is excluded, and that exclusion is standard rather than unreasonable. What it means practically is that your protection is the remedy clause and the inspection clause, not the liability clause. The bad case is prevented at the inspection, not compensated afterwards.

The second and third items are where a small negotiation buys something real. A 30-day warranty with a 7-day claim window is a narrow door for a defect that will only appear after six weeks of backer use. Asking for 90 days and 30 days is a modest request, it is often granted, and it is worth more in practice than any change to the cap. Pair it with a requirement that the inspection report be provided with photographs, and you have a usable record.

There is one more thing worth putting in the contract rather than in an email, which is the retention of a physical reserve. Agreeing that 3 to 5 per cent of units are held as replacement stock, or that a small number of additional units are made for this purpose, converts the warranty from a promise into a shelf of spare parts. It costs a few hundred dollars and it removes the need for a replacement production run entirely.

And the closing clause, which is one line and often forgotten: the dispute resolution mechanism. Name the governing law and the place where a dispute would be heard. If you never need it, it cost nothing. If you do need it, the absence of it will cost more than the rest of the contract put together.

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