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Tooling Agreements: Essential Guide for Businesses and Manufacturers

Learn how tooling agreements protect your business interests when outsourcing manufacturing. Essential information for startups, small businesses, and established companies expanding their supply chain.

Introduction

A Tooling Agreement is a critical legal document that defines the ownership, use, and maintenance of tools, molds, dies, and other equipment used in manufacturing your products. Whether you're a startup founder with an innovative product, a small business owner, or an established company expanding your supply chain, this agreement protects your investment in specialized manufacturing equipment while establishing clear expectations with your manufacturing partners. This document helps prevent disputes over who owns the tooling, how it can be used, and what happens to it when your business relationship ends.

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Key Things to Know

  1. 1

    Tooling agreements establish clear ownership of manufacturing tools and equipment, typically ensuring that you (the customer) retain ownership of tooling you've paid for.

  2. 2

    These agreements prevent manufacturers from using your custom tooling to produce products for your competitors or themselves.

  3. 3

    A good tooling agreement addresses maintenance responsibilities, storage conditions, and quality standards for the tooling.

  4. 4

    The agreement should specify what happens to the tooling if the manufacturing relationship ends or if the manufacturer goes out of business.

  5. 5

    Pricing terms should be clearly defined, including initial costs, payment schedules, and any ongoing maintenance fees.

  6. 6

    Intellectual property protections are crucial, especially for proprietary designs embedded in the tooling.

  7. 7

    Insurance and liability provisions protect your investment if tooling is damaged, lost, or stolen.

Key decisions before you file

Before you file a Tooling Agreement in Indiana, a few decisions shape the document: which option to choose and what each one means. The Tooling Agreement guide walks through them.

Open the Tooling Agreement guide

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Indiana Requirements for Tooling Agreement

  • Indiana Uniform Commercial Code (Indiana Code § 26-1-2)

    The agreement must comply with Indiana's adoption of the Uniform Commercial Code (UCC), particularly Article 2 governing sales of goods, as tooling agreements often involve the sale of manufactured goods produced using the tools.

  • Indiana Mechanic's Lien Law (Indiana Code § 32-28-3)

    The agreement should address potential mechanic's liens that suppliers might place on tooling for unpaid work, in accordance with Indiana's mechanic's lien statutes.

  • Indiana Uniform Trade Secrets Act (Indiana Code § 24-2-3)

    The agreement must include provisions protecting proprietary information and trade secrets related to the tooling design and specifications, in compliance with Indiana's trade secret protection laws.

  • Indiana Statute of Frauds (Indiana Code § 26-1-2-201)

    The agreement must be in writing if the value of the tooling exceeds $500, in accordance with Indiana's statute of frauds requirements for sales of goods.

  • Indiana Contract Formation Laws (Indiana Common Law and Indiana Code § 26-1-2)

    The agreement must meet Indiana's requirements for valid contract formation, including offer, acceptance, consideration, legal purpose, and competent parties.

  • Indiana Personal Property Tax Laws (Indiana Code § 6-1.1-3)

    The agreement should specify responsibility for personal property taxes on the tooling, as Indiana imposes taxes on business personal property including manufacturing equipment.

  • Federal Intellectual Property Laws (35 U.S.C. (Patents), 15 U.S.C. (Trademarks), 17 U.S.C. (Copyrights))

    The agreement must address intellectual property rights related to the tooling, including patents, trademarks, and copyrights, in compliance with federal IP laws.

  • Indiana Choice of Law Provisions (Indiana Common Law)

    The agreement should include a choice of law provision specifying Indiana law as governing, which Indiana courts will generally enforce for contracts with sufficient connection to the state.

  • Federal Bankruptcy Code (11 U.S.C. § 101 et seq.)

    The agreement should address what happens to the tooling in the event of bankruptcy by either party, in compliance with federal bankruptcy laws.

  • Indiana Bailment Laws (Indiana Common Law)

    The agreement must comply with Indiana's bailment laws when the tooling is in the possession of the manufacturer but owned by the customer.

  • Federal Export Control Laws (Export Administration Regulations (15 CFR Parts 730-774) and International Traffic in Arms Regulations (22 CFR Parts 120-130))

    If the tooling or products involve international commerce, the agreement must comply with federal export control regulations.

  • Indiana Warranty Law (Indiana Code § 26-1-2-312 to § 26-1-2-318)

    The agreement should address warranties related to the tooling and manufactured products, in compliance with Indiana's warranty laws.

  • Indiana Limitation of Liability Provisions (Indiana Code § 26-1-2-719)

    The agreement should include limitation of liability provisions that comply with Indiana law, which generally permits such limitations unless unconscionable.

  • Federal Magnuson-Moss Warranty Act (15 U.S.C. § 2301 et seq.)

    If consumer products are involved, the agreement should address compliance with federal warranty disclosure requirements.

  • Indiana Indemnification Law (Indiana Common Law)

    The agreement should include indemnification provisions that comply with Indiana law regarding allocation of risk between contracting parties.

  • Federal Product Safety Laws (Consumer Product Safety Act (15 U.S.C. § 2051 et seq.))

    The agreement should address compliance with federal product safety standards if the tooling is used to manufacture consumer products.

  • Indiana Dispute Resolution Provisions (Indiana Code § 34-57-2 (Uniform Arbitration Act))

    The agreement should include dispute resolution provisions that comply with Indiana law, which generally enforces arbitration and mediation clauses.

  • Federal Antitrust Laws (Sherman Act (15 U.S.C. § 1-7) and Clayton Act (15 U.S.C. § 12-27))

    The agreement must avoid provisions that could be construed as anti-competitive under federal antitrust laws, particularly if the agreement restricts the manufacturer's ability to work with competitors.

  • Indiana Insurance Requirements (Indiana Code § 27-1 et seq.)

    The agreement should specify insurance requirements for the tooling, in compliance with Indiana insurance laws.

  • Indiana Abandoned Property Law (Indiana Code § 32-34-1)

    The agreement should address what happens if tooling is abandoned, in compliance with Indiana's abandoned property laws.

Frequently Asked Questions