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A preferred supplier agreement (PSA) differs from a contract to supply services, although many businesses use both. In New Zealand, it's common for service suppliers, like IT and cleaning companies, to have a PSA in place. Unlike a formal contract, a PSA generally reflects a less rigid arrangement based on mutual understanding rather than legal obligations. This distinction is especially relevant when a business is sold, as the new owner must consider the continuity of services provided under these agreements. For instance, in a carpet cleaning business with an informal PSA, the long-standing relationship allows for ongoing service without strict contractual terms.