A product supply agreement is an agreement in which a supplier sells products to a business, and specifies the terms for the transactions, including the price, timing, quantities, delivery, shipping, payment terms, exclusivity, return of defective or nonconforming goods, and return of unsold goods. A supplier may be a distributor, wholesaler, dealer, or merchant.

In California, a product supply agreement is a legally binding contract between a supplier and a business that outlines the terms and conditions of the sale and purchase of products. These agreements typically cover various aspects such as pricing, order quantities, delivery schedules, shipping methods, payment terms, and exclusivity clauses. They also address the handling of defective or nonconforming goods, including returns and replacements, as well as the return of unsold goods. California's Commercial Code, which is based on the Uniform Commercial Code (UCC), governs transactions involving the sale of goods and would apply to product supply agreements. The UCC sets forth the general rules for contracts, including offer and acceptance, consideration, and the rights and obligations of the parties involved. Additionally, California law requires that certain contracts, including those for the sale of goods over a certain value, be in writing to be enforceable. It is important for businesses to ensure that their product supply agreements comply with these regulations and any other relevant federal laws, such as antitrust laws that could affect exclusivity arrangements.