Category Archives: Vendor Agreement

Why vendor agreement must be executed?

A Vendor Agreement is an agreement which is made by the business owner, or any other individual to hire products and/or services from other party. It covers various areas such as office supplies, professional services, technology services, marketing etc. It is a very important agreement as it defines the description of the product or services. To minimize the risk of conflict, expectations are clearly defined under Vendor agreement.

Few things must be considered while drafting vendor agreement.  

  1. There must be a detailed description of products or services.
  2. Work statement should also be attached with the vendor agreement.
  3. There must be a clause consisting payment terms of the product or services.
  4. There must be penalty provisions in case of late payment.
  5. Termination terms of the agreement must be clearly defined.
  6. There must be a clause consisting intellectual property like who owns the IP, license granted to the other party.
  7. It should also specify the representation and warranties.
  8. Confidentiality: There must be terms regarding disclosure of confidential information and for this parties can also execute non disclosure agreement.
  9. Indemnification term: Under this, vendor agrees to indemnify for a breach of warranty, willful/ negligent act, and omissions in case of infringement of a third party’s intellectual property rights.
  10. Limitation of liability clause is very important as it excludes the incidental or consequential damages from the liability of the party.
  11. A vendor’s agreement must define the relationship among both the parties.

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What is a Vendor Agreement

Introduction: If you are doing a business you require goods and services to run your own business on a daily basis. Any purchase is it from the e-commerce website, raw material for your product, buying the goods for supply, would be considered a vendor or service provider for your business.

Requirement of Vendor Agreement

Defining the terms and conditions between your business and the vendor in respect of the goods/ services provided, there comes a need of a vendor agreement.

Vendor Agreement is an agreement between the goods or service provider to company or individual. Vendor agreement is important when you tie up for selling the products because it brings all the terms of sale and purchase into writing. The basic purpose of entering into such agreement is to describe the rights and obligations of the both the parties and hence avoiding the risk of dispute in future between them.

Benefits of entering into Vendor Agreement

Execution of standard agreement is an important tool for managing a vendor business. Vendor agreements varies depending upon the type of business and type of service provided

Written description of the services is always a welcome option to avoid the disputes

Written agreement provides clarity between the parties because it states the stipulation of the work to be performed

Executing agreement between the parties before entering into services sets the expectations and avoid the confusion of what type and quality of services to be provided or not to be provided

What Does A Vendor Agreement Usually Cover?

Vendor agreements can be drafted of different forms depending upon the type of business you are engaged in. However, there are certain general terms that should be incorporated into any vendor agreement to avoid the uncertainties in future. So below are some of the general clauses that should be specifically included:

  1. Scope of the services or goods

This is one of the important clauses that must be incorporated with clarity in any vendor agreement that defines the exact scope, quality and type of goods/ services provided and not provided for their business. The more detailed vendor contract is, the lesser wil be the chances of dispute in the future.

  1. Terms of Payment:

Next most important provision after the above clause is mentioning the payment provision in a vendor agreement. By defining that whether payment is to be in lump sum or made in installments, you are avoiding the situation which could lead to disputes in future

  1. Representations & warranties:

While executing the agreement the vendor should set out some of the representation that he has the necessary qualification to provide such service and he has not infrigined the intellectual property right of the other party

  1. Dispute resolution or mediation

The parties should always pay careful attention to insert a dispute resolution clause in your vendor agreement that requires both the parties to pursue mediation and dispute resolution mechanism in case of dispute before proceeding for legal action.

  1. Liability Clause

This clause must be stated as to what extend the vendor will be liable to the loss caused due to his carelessness and negligence.

  1. Termination Clause

A termination clause must be a part of the contract where either of the party has an option to terminate the contract in case of breach of confidentiality, or conduct of illegal activity by giving a notice period.

  1. Indemnity clause

The vendor agreement should also cover up the indemnity clause for making good the loss caused by the breach of terms of agreement or loss caused due to the negligence of vendor

  1. Confidentiality

This is the most important clause of any agreement which clearly spells out is that all information shall be kept confidential and cannot be shared without the knowledge and consent of company.

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