Under this arrangement, the vendor controls how much stock you hold—they decide what quantity sits in your warehouse and when to replenish it. You don't order; they push stock to you based on their own system. This is risky legally because you may still own the stock (and be liable if it's damaged or stolen) even though you didn't choose to have it. The key legal issue is "ownership vs. control"—you might pay for inventory you didn't request and can't return. In practice, this works well only if the contract clearly states the vendor bears all costs and risk until you actually use the stock.
Insist the contract specifies that the vendor owns the stock until you consume it, and that they bear all storage and damage costs. Set a maximum inventory level you'll accept—otherwise they could flood your warehouse. Include a right to return slow-moving stock within 30 days without penalty. ---
Frequently Asked Questions
What does this clause mean in simple terms?
Under this arrangement, the vendor controls how much stock you hold—they decide what quantity sits in your warehouse and when to replenish it.
Why should I care about this clause?
You don't order; they push stock to you based on their own system.
What are my options?
This is risky legally because you may still own the stock (and be liable if it's damaged or stolen) even though you didn't choose to have it.
How does this affect small businesses?
The key legal issue is "ownership vs.