Why this matters more than the unit price

Tooling ownership is the single most under-negotiated line in supplier agreements. The unit price gets weeks of back-and-forth. The tooling clause gets a paragraph copy-pasted from a 2014 template — and then becomes the most expensive paragraph in the contract when you try to change suppliers four years later.

Clause 1: title and physical possession

What it should say: Title to all tooling, dies, molds, fixtures, and jigs paid for by the buyer transfers to the buyer upon payment of the tooling invoice — regardless of physical location.

What suppliers often draft: Title transfers on "completion of contract" or "after the final production run." That phrasing means the supplier owns your tooling for the duration of the relationship.

Why it matters: If the supplier files insolvency, title-already-transferred tooling can be retrieved. Title-pending tooling becomes part of the bankruptcy estate. We have lost six-figure tooling to exactly this scenario.

Clause 2: transfer rights and timing

What it should say: Buyer may request physical transfer of tooling to a third-party supplier at any time, with 30 days written notice. Supplier shall facilitate transfer at cost (capped at $X) and not impede.

What suppliers often draft: Silent on transfer, or includes vague 'reasonable cooperation' language with no cost cap and no timeline.

Why it matters: Without an explicit transfer clause, an exiting supplier can hold your tooling hostage with $50,000 'handling fees' or six-month delays. Even when title is clearly yours.

Clause 3: maintenance and refurbishment

What it should say: Supplier maintains tooling to manufacturer specifications throughout production. Refurbishment is included in unit pricing for tooling life up to [agreed cycle count]. Refurbishment beyond that is quoted separately at not more than 25% of original tooling cost.

What suppliers often draft: Maintenance is the buyer's responsibility, or refurbishment is quoted ad-hoc.

Why it matters: Two years in, the supplier 'discovers' tooling is worn and quotes $12,000 to refurbish — leaving you with no choice and no benchmark.

Magnus standard

Our default supplier agreement template ships with all five clauses pre-negotiated. We have refused to onboard suppliers who would not accept them. The pattern: the suppliers who refused were exactly the ones the clauses were designed to protect against.

Clause 4: dedicated use

What it should say: Supplier shall not use buyer-owned tooling to produce parts for any third party, and shall not produce parts using tooling that creates substantially similar parts to buyer's specification for any third party.

What suppliers often draft: Silent.

Why it matters: Without this, a supplier can run your tooling overnight for a competitor, or copy your design into a 'similar' tool the moment volumes look tempting. We have caught both.

Clause 5: end-of-life and disposal

What it should say: Upon termination of supply agreement, buyer may (a) take physical possession of tooling, (b) instruct supplier to ship tooling to designated location at buyer's cost, or (c) authorize destruction with photographic evidence. Supplier shall not dispose of tooling without written authorization.

What suppliers often draft: Tooling becomes supplier property after [time period] of inactivity, or is destroyed at supplier's discretion.

Why it matters: If you pause production for 18 months and then want to restart, you don't want to find out your $40,000 tool was scrapped because it was 'taking up shop floor space.'

Indian commercial courts increasingly recognise tooling ownership claims, but enforcement is slow — typically 18–36 months for a tooling recovery dispute. The pragmatic mitigation is contractual clarity at the start, not litigation at the end.

Use an Indian law firm to review the clauses (we recommend one based in Mumbai or Bangalore who handles supplier disputes). The cost — typically $400–$800 to review and amend — is the cheapest tooling insurance you will ever buy.