The Private-Label Agreement — What the Contract Must Actually Say

A Nigerian manufacturing operation commonly presents under a trading style, operates through a company registered at the Corporate Affairs Commission, and issues invoices in a third name belonging to an affiliated trading arm. The seller who writes the factory's signboard into the parties clause has contracted with a name rather than a person.

The clause has to identify each party by its registered corporate name and registration number as they appear on the CAC record, state its registered address, and — where the counterparty is one company in a group — record whether any obligation is guaranteed by another. It should also state, plainly, that each signatory is authorised. That last point is not ceremony. Where a person signs without authority, the seller's remedy against the company may fail entirely and reduce to a claim against the individual for breach of warranty of authority, which is a poor substitute for a factory.

Where the manufacturer is foreign — and in this sector it very often is — the clause carries a second burden, because a judgment against a company with no Nigerian assets is a piece of paper. That is a governing-law and enforcement problem, and clause twelve is where it is answered.

The specification is the actual subject matter of the arrangement, and it belongs in an annexed schedule rather than in the body: formulation or bill of materials, dimensions and fill weight, permitted tolerances, ingredient or component origin where it matters, packaging materials and print colours to a defined reference, labelling copy, shelf life, and the test methods by which conformity is judged.

Two mechanisms make the schedule work. The first is a change-control provision — the specification may not be varied except in writing signed by both parties — which prevents the silent substitution of a cheaper input, the single most common quality failure in the sector and one that surfaces only when a consumer complains. The second is a retained-sample protocol: a sealed reference sample of each production batch, held by both parties for a defined period. When the dispute comes, the sample is the evidence, and it is the party that kept one who is believed.

How the specification is inspected, who bears the cost of testing, and what happens to non-conforming batches is quality control, and that is a clause of its own with a body of trademark law standing behind it. Clause four takes it up.

This is the clause the supply contract never contains, and it is the reason the arrangement is a licensing arrangement rather than a purchase. Applying a mark to goods in the course of trade is an act reserved to the proprietor under the Trade Marks Act, Cap T13, Laws of the Federation of Nigeria 2004. A factory printing the seller's name without permission is infringing; a factory printing it with unwritten permission is licensed on terms nobody recorded.

The grant should be narrow on five axes at once. Purpose — solely to apply the mark to goods manufactured for the seller under this agreement. Exclusivity — non-exclusive, so the seller retains the ability to appoint another manufacturer. Sub-licensing — prohibited absolutely, or the factory's subcontractor acquires rights the seller never considered. Territory and term — coterminous with the agreement, not perpetual. Revocability — terminable on the agreement ending, with no residual right to use the mark on remaining stock beyond a defined sell-off.

Alongside the grant sits its mirror: an express acknowledgement that the mark and all goodwill in it belong to the seller, that all use by the manufacturer accrues to the seller's benefit, that the manufacturer will not apply to register the mark or any confusingly similar mark in any territory, and that any registration nonetheless obtained will be assigned to the seller on demand. That covenant against registration is the single most valuable sentence available to a private-label seller, and it costs nothing to insert.

A trademark exists to indicate a connection in the course of trade between goods and a proprietor. When a proprietor permits another to apply the mark and exercises no control over what is produced, the mark stops performing that function, and the arrangement acquires the name the doctrine gives it: naked licensing. The Nigerian statute approaches the same problem through its registered-user provisions, which contemplate permitted use recorded on the register and subject to conditions.

The clause therefore has to give the seller a real and exercisable right of control, not a stated intention to care about quality: a right of inspection on notice, defined acceptance testing against the clause-two schedule, a documented procedure for rejecting non-conforming batches, and an obligation on the manufacturer to hold and produce batch records.

How much control is enough, whether registered-user recordal is worth its administrative cost in Nigeria, and what a mark actually loses when quality control has been nominal for years, are the questions of a separate essay in this cluster, which will take the clause on its own. It is the most under-written provision in the entire set and it deserves the room.

Copyright in an artistic work vests first in its author. Where a seller commissions a label, a jar illustration or a set of pack renderings from a designer, or where the factory's in-house studio produces them, the person who drew it holds the copyright until it is assigned — and under the Copyright Act 2022 an assignment must be in writing. Payment alone does not transfer it. An invoice marked paid in full transfers nothing.

Here a foreign doctrine causes real damage in Nigerian practice. The American concept of work made for hire, under which a commissioning party may be treated as the author outright, is a feature of United States copyright law and is routinely assumed by Nigerian founders who have absorbed it from imported templates and online advice. It is not the Nigerian position. Assuming it is why so many otherwise careful sellers hold no rights in their own packaging.

The clause should require written assignment of all copyright and design rights in artwork, copy and packaging renderings created for the seller, effective on payment, together with a waiver of moral rights so far as they may be waived, and a covenant to execute any further documents needed to record the position. Where a third-party designer was used, the assignment has to come from the designer, not from the factory that engaged him — the factory cannot assign what it never held.

Formulations are rarely registrable. They sit on confidentiality — a matter of contract and conduct rather than filing — which means the contract is not evidence of the right but very nearly the right itself.

The clause has to answer three questions in sequence. Who brought what: the seller's contributed formulation and the manufacturer's pre-existing background know-how should be separately identified, ideally in a schedule dated at commencement. Who owns what emerges: improvements and adaptations developed during the relationship need an owner named in advance, because after the fact both parties will remember having invented them. And what may be done with it afterwards: whether the manufacturer may make the same product for another customer, and whether the seller may take the formulation to a different factory.

That third question is where private-label arrangements most often turn out to be something else. A seller who cannot take the formulation elsewhere did not commission a product; she bought access to the factory's product and put her name on it. That may be a perfectly sound commercial arrangement — but it is a different arrangement from the one she believes she is in, and the cluster's sibling on the formula exists to take that distinction apart properly.

Bottle moulds, closure tools, print plates, dies and embossing rollers are commissioned and paid for by the seller at the outset, often as a substantial line item, and then physically installed in the manufacturer's plant, where they remain. Ownership and possession part company on day one, and the contract is the only thing that records the separation.

The clause needs four elements: a statement that tooling paid for by the seller is the seller's property; an itemised tooling schedule kept current as tools are added; an obligation to mark or tag the seller's tools and hold them separately identified; and a right of removal on termination, at the seller's cost, within a stated period.

Maintenance, replacement when a tool wears out, and what happens where tooling costs were amortised into unit price rather than invoiced separately, are the practical difficulties, and they run into the wider question of what it costs to leave a manufacturer at all. A later essay in this cluster is devoted to that departure.

For regulated goods, a registration or certification stands behind lawful sale, and it is granted to an applicant. Where the manufacturer applies in its own name — which is administratively simpler and therefore common — the seller's ability to place the product on the market is contingent on a permission she does not hold and cannot transfer.

The clause has to state in whose name registrations are to be applied for and held, allocate the cost and the administrative burden, require the holder to maintain them in force and not to allow them to lapse, require prompt notice of any regulatory communication or adverse finding, and provide for transfer or fresh application on termination.

Which registrations are required, which regulator grants them, whether the manufacturer or the brand owner is the proper applicant in a given case, and what a transfer actually involves, are matters for the cluster's essay on the regulator — a subject with enough procedural weight to distort this one if taken further here.

Exclusivity is the term sellers ask for most often and understand least. It runs in two directions and they are not symmetrical. The manufacturer may agree not to supply the same product to a competitor — a restraint on the factory. Or the seller may agree to buy only from this manufacturer — a restraint on the seller. Sellers frequently ask for the first and accept the second in the same conversation without noticing they have exchanged an advantage for an obligation.

Whichever way it runs, it needs boundaries: a defined field, so exclusivity attaches to a product category rather than to everything the factory makes; a defined territory; a defined term; and a consideration. Exclusivity granted by a manufacturer for nothing will be honoured for exactly as long as it costs nothing, which is until a larger customer appears. Exclusivity supported by a minimum volume commitment is a bargain a court can recognise, with a stated consequence if the volume is not met — most sensibly conversion to non-exclusive rather than damages.

One drafting caution. A stated consequence that operates as a punishment rather than a genuine estimate of loss may be unenforceable as a penalty — a distinction inherited from English authority and applied in Nigerian courts, and worth naming as inherited so its limits are visible.

Liability is settled elsewhere in this cluster, and the conclusion is imported here rather than re-argued: the consumer sues the name on the label, and the Federal Competition and Consumer Protection Act 2018 casts its net across those who supply goods into the market rather than only those who made them. The seller answers first. What the contract can do is determine whether she is ultimately reimbursed.

An indemnity from the manufacturer against loss arising from defective manufacture or departure from specification is therefore necessary and insufficient at once. It is bounded by four things: its wording, which may not extend to the loss actually suffered; any cap or exclusion of consequential loss elsewhere in the agreement, which frequently swallows it; the manufacturer's solvency, since an indemnity from an insolvent factory is worth nothing; and time, because the seller pays the claimant long before she recovers from the factory, if she ever does.

Which is why the clause should carry an insurance obligation with it — product liability cover at a stated minimum, the seller named as an additional insured or the policy noted with her interest, evidence produced annually — and a recall provision allocating who decides, who executes and who pays. The liability essay works the exposure through in full.

Because the formulation and specification rest on confidence rather than registration, this clause is doing structural work and should not be inherited from a template. It needs a definition of confidential information specific enough to be enforced, which means identifying categories rather than reciting that everything exchanged is confidential; the standard exclusions for information already public, independently developed or lawfully received; a permitted-purpose limitation, so the information may be used only to perform this agreement; a flow-down obligation binding employees and subcontractors, since the factory's floor staff are not parties; a survival period outlasting termination, and for a formulation that period should be long or indefinite; and a return-or-destruction obligation on termination, with certification.

It should be mutual. A one-way obligation running only from seller to manufacturer invites the reading that only the manufacturer had anything worth protecting.

And it must be in force before anything moves. This is a matter of sequencing rather than drafting, and it is the sequencing that fails: samples and specifications are commonly sent during courtship, weeks before any document is signed, and no clause executed later fully repairs that.

The agreement needs a term and a mechanism for ending it: a stated duration, whether renewal is automatic or by agreement, termination for convenience on notice long enough for the seller to qualify another manufacturer, and termination for cause on material breach, insolvency or change of control of the manufacturer.

Then the run-off, which is where a badly drafted termination clause does its damage. What happens to work in progress, to finished stock bearing the seller's mark, and to the raw materials and printed packaging the factory bought against a forecast? A defined sell-off period, a right of first refusal over finished stock, an obligation to deliver up or destroy printed packaging with certification, and the return of artwork, tooling and confidential material. Without these, the factory's inventory of the seller's labelled goods becomes leverage at exactly the moment the relationship has none.

The final elements are procedural and are usually skipped, which is a mistake. Governing law should be stated. Dispute resolution should be chosen deliberately — the Arbitration and Mediation Act 2023 now governs arbitration in Nigeria, and where the manufacturer is foreign, an arbitral award is very often more portable across borders than a Nigerian judgment. And the agreement should be stamped, because an unstamped instrument meets an evidential obstacle at precisely the moment it is needed, and the duty is trivial compared with the cost of arguing about admissibility.