3PL Contract Terms: What to Look For Before You Sign

A 3PL contract decides how long you are tied in, what you pay when volumes drop, what the warehouse owes you when stock goes missing, and how you get your stock back when you leave. Ten clauses carry most of the risk, and you can check all of them before you sign.

This guide explains each one and what to ask for. It is general information, so have a solicitor review the contract before you sign.

The pain points

• We missed the notice date by a week and got rolled into another year.

• Orders dipped in January and we were billed the monthly minimum anyway.

• A pallet went missing and the warehouse's liability came to a tiny fraction of what the stock cost us.

• Rates went up mid-contract and we couldn't find the clause that allowed it.

• When we gave notice, the warehouse held all our stock over one disputed invoice.

Commitment: term, notice and minimum spend

Term and notice. Find the initial term, whether it renews automatically, and how much notice you must give to stop the renewal. A long term often comes with better rates. A long notice period on an automatic renewal can hold you for a further term if you miss the date. Ask for a break clause tied to service failures.

Minimum monthly spend. Many providers set a floor on the monthly bill. Check what counts towards it (storage, pick and pack, postage or all three), whether it ramps up during onboarding, and whether it is measured each month or averaged over a quarter. Test it against last year's quietest month. Our guide to what a 3PL costs in the UK lists the charges that usually sit behind a minimum.

Price over time: rate reviews, payment terms and change control

Rate reviews and indexation. Check how often prices can change, by how much and on what basis. Some tie increases to an index such as CPI, and labour-heavy rates often move when the National Living Wage rises each April. Ask for a cap on annual increases, a fixed review date and written notice well ahead of it. Many UK warehouses trade on the UK Warehousing Association (UKWA) contract conditions. The 2024 edition requires at least 21 days' notice of a price increase, or 7 days for fuel-related increases, so agree a longer period if you need time to re-price.

Payment terms. Check the due date, any deposit, and the interest on late payment. Under the UKWA 2024 conditions, charges are paid without deduction or set-off, which means you cannot hold back part of an invoice you dispute, and overdue sums carry interest at 1.5% a month. Agree a written process for disputed invoices.

Change control. New SKUs, kitting, a new sales channel or a packaging change all alter the work. The contract should say how a change is requested, priced and signed off in writing before it starts, so extra charges do not appear on an invoice unannounced.

Risk: liability, insurance and stock loss

Liability caps. Most warehouse contracts limit what the provider pays for lost or damaged goods, often per tonne, per kg or per unit. The UKWA 2024 conditions set a default limit of £100 per tonne unless the customer agrees a higher limit and pays for the cover, and £1,000 per incident for other kinds of loss. In an invented example, 400 kg of electronics worth £20,000 would be covered for £40 at the default limit. Ask for a limit per unit that reflects your stock value, or arrange your own stock insurance.

Insurance. Under the UKWA conditions, the warehouse does not insure your goods unless that is expressly agreed, and you are expected to cover them to their full value. Ask what the provider's own policy covers, and tell your insurer where your stock is.

Claim deadlines. The same conditions require written notice of a claim within 10 days of the event, with details within 21 days, and legal proceedings within 9 months. Line these up with your stock checks so a loss is spotted in time.

Stock loss and shrinkage allowances. Some contracts set a tolerance of stock loss the provider will absorb before it pays anything. Ask how the tolerance is measured (units or value), over what period, how cycle counts work, and whether you are paid at cost price. Keep the tolerance as low as you can.

Performance: SLAs and service credits

Service levels should be written down and measured: receiving time for inbound stock, same-day dispatch cut-off, pick accuracy, stock accuracy and response times for queries. Check who measures them and how often they are reported. Service credits return a share of fees for a missed target. Check whether credits are your only remedy, and ask for the right to end the contract after repeated failures.

Leaving: lien, exit and data handover

Lien over goods. A lien lets the warehouse hold your stock until you pay what you owe. The UKWA 2024 conditions give a general and particular lien, so the provider can hold any of your goods for any sum owed, including charges unrelated to those goods. After notice for non-payment, you have 14 days to pay before the provider may sell or dispose of them. Ask for the lien to be removed, limited to the goods the charges relate to, or limited to undisputed sums.

Exit and data handover. The contract should set out a final stock report by SKU, batch and location, a reconciliation against your own records, help with the transfer, and the fees for picking down, palletising and loading. Ask for an export of order, stock and returns history. Our 3PL migration checklist covers the move itself.

Our recommendation: read the contract at proposal stage

1. Ask every shortlisted provider for its full contract and any standard conditions it refers to, such as the UKWA conditions. Build this into your 3PL tender.

2. Write down the term, renewal date and notice deadline, and put the deadline in your calendar.

3. Test the minimum spend against your quietest month.

4. Value your stock per kg and per unit, compare it with the liability limit, and arrange insurance for the gap.

5. Agree SLAs with service credits and a termination right for repeated failures.

6. Agree the lien wording and a written exit schedule before you sign.

7. Use our list of questions to ask a 3PL to fill the gaps, then have a solicitor review the final draft.

What waiting costs

Contract terms bite on fixed dates. Miss a notice deadline and you may be bound for another full term. Miss a 10-day claim window and a loss may be unrecoverable. A disputed invoice can trigger a lien on every pallet you hold, with a 14-day route to sale. In an invented example, a brand with a £2,500 monthly minimum whose real usage drops to £1,500 for six months pays £6,000 for work that never happened. Checking the contract first costs a few hours and a solicitor's fee.

People Also Ask

How long is a typical 3PL contract?

Terms vary by provider and by volume. Check the initial term, whether it renews automatically and the notice needed to leave. Ask whether a shorter term is available, and what it costs in rates.

What is a warehouse lien?

A lien is the warehouse's right to hold your goods until you pay what you owe. A general lien covers any sum owed, including charges unrelated to the goods held. You can ask for it to be limited or removed during negotiation.

Does a 3PL insure my stock?

Usually only if the contract says so. Under the UKWA conditions, the warehouse does not insure your goods unless that is expressly agreed, and liability is capped by default at £100 per tonne. Check the cover and arrange your own stock insurance for the difference.

Finding the right 3PL partner

Logan, FulfilQ's advisor on the website, matches brands to verified providers by order volume, product type and region. Tell Logan what you store and how many orders you ship, and you get a shortlist to ask about contract length, minimum spend, liability limits and exit terms. Start at fulfilq.com and Ask Logan, or Submit an RFP and verified providers come back to you. You can also browse the full provider directory. For the full selection process, read our guide to choosing a 3PL for ecommerce in the UK.