Five Contract Clauses Every Cosmetic Manufacturer Must Nail (Before Their Next Client Does)

Setting the stage

Whether you’re a contract manufacturer scaling K‑beauty dupes or a boutique lab whipping up CBD serums, iron‑clad agreements are your barrier cream against scope creep, recalls, and margin melt. Here are five clauses my team rewrites on every manufacturing contract — plus the red‑flag language to delete today.

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1. Scope of Services — “The Formula Freeze”

Why it matters: Without a precise scope, a brand can return months later demanding tweaks on your dime.

Language to keep:

“Any modification to the Product Formula must be requested in writing and accepted by Supplier pursuant to the Change‑Control procedure in Section 4. Modifications requested outside that procedure shall be subject to a separate written agreement and additional fees.”

Delete: vague phrases like “including any improvements made by Supplier” — they turn your R&D roadmap into an unfunded liability.

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2. Price Escalation & Raw‑Material Shocks

Tie your BOM costs to a public index (e.g., ICIS Chemical Price Index) with a ±10 % collar and a quarterly true‑up clause. It’s the fastest way to avoid “polymer sticker shock.”

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3. MoCRA Compliance Allocation

Post‑2023, every buyer wants you to shoulder MoCRA’s record‑keeping. Flip the script:

“Buyer shall serve as ‘Responsible Person’ under MoCRA and shall maintain product listings, adverse‑event files, and fragrance‑allergen disclosures. Supplier’s liability under MoCRA is limited to GMP obligations expressly set forth herein.”

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4. Intellectual‑Property Ownership

Option A: Buyer owns finished formula; Supplier retains background IP + methods.
Option B: Supplier licenses exclusive use for X years, then re‑commercializes.
Pick one. Mixing language (“joint ownership,” “perpetual license”) invites dispute.

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5. Indemnity & Recall Matrix

Create a fault‑tier chart:

Trigger	Who pays?
GMP deviation proven	Supplier
Buyer‑supplied artwork misbranding	Buyer
Force‑majeure raw‑material contamination	Split 50/50, capped at COGS for affected batch

Give numbers — not feelings — and tie them to a CAP (e.g., 100 % of past 12‑month fees).

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Quick red flags when reviewing a draft contract

• Unlimited consequential‑damages liability
  
• “Time is of the essence” tied to hard launch dates without raw‑material availability carve‑outs
  
• Automatic IP assignment of “all derivative works” without definition
  

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Implementation playbook

1. Audit existing MSAs — mark expiration and auto‑renewal dates.
   
2. Roll out a “Clause Library” for sales to paste into every deal.
   
3. Train PMs to recognize scope‑creep requests and route them to change‑orders.
   
4. Schedule annual contract health checks — align with your ISO 9001 internal audit.
   

CLS pro tip: During price‑increase season, send clients a “GMP & Regulatory Addendum” that folds in MoCRA language and updated IP terms. Clients perceive added value, making the cost bump easier to accept.

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Ready to bulletproof your contracts before Q3 quote season?

Book a 30‑minute Contract‑Strategy Session.