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The difference between a preferred supplier agreement (PSA) and a contract to supply is significant for business buyers. Many businesses, particularly in New Zealand, utilize PSAs with service providers like IT and cleaning companies. A PSA is not equivalent to a formal contract to supply services. Typically, these agreements ensure a consistent relationship, which is crucial when a business is sold, as the buyer requires continuity of service. For instance, in a carpet cleaning business with a PSA, the arrangement may be informal, reflecting a good rapport between parties, allowing them to conduct business smoothly despite lacking a formal contract. Understanding these distinctions is vital for buyers.