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 Illinois, 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. The agreement typically includes details on pricing, order quantities, delivery schedules, shipping logistics, and payment terms. It may also address issues of exclusivity, stipulating whether the supplier is the sole provider of certain goods to the business, and the protocols for handling defective or nonconforming goods, including returns and replacements. Additionally, the agreement might cover the return of unsold goods. These agreements are subject to Illinois contract law, which requires that the terms be clear, mutually agreed upon, and supported by consideration. The Uniform Commercial Code (UCC), as adopted in Illinois, also governs transactions involving the sale of goods, providing default rules for areas not specifically addressed by the agreement. It's important for businesses to ensure that their product supply agreements comply with relevant state statutes and federal laws to avoid legal disputes and ensure smooth commercial operations.