Vendor Contracts – What Are They and Do You Need Them?

Reconnaissance UT2M 2011 St Jean de Garguier Cassis (71)

A vendor contract is simply a contract between you and one of your vendors.  It is always a good idea to have all contracts in writing, for your protection, including these agreements.

What is a vendor?

First, it is good to understand what a vendor is:  A person or company that sells goods or services to your company.  This could be a supply of raw materials you use in your business or your coffee supplier.

Why Have a Vendor Contract?

A vendor contract is important because it documents the terms of your agreement.  It really does not matter if you are dealing with your corner store or a multi-million dollar business, a vendor contract is important to have in place.

What goes into a Vendor Contract?

The key elements that your agreement should contain are the cost or price, services or products provided, what happens if something goes differently than planned, and the dates for delivery. An agreement is hammered out so that, ideally, the consequences to be suffered for any possible scenario will be spelled out specifically.   So, more specifically, you need to name the supplier and yourself as parties to the contract.  The next step is to describe in detail the goods or services to be provided under the vendor contract and the terms of delivery or term if a service is the subject of the agreement.  Then, you need to agree on the price and capture that in your agreement, to include any specific payment types expected and when the payment or payments are due.  If there is any concern for privacy, then those terms should be captured in your this agreement.  Next, you should include any specifics on how or when the contract can be terminated (i.e., must have 30 days notice and what happens if one of the parties does not adhere to the terms of the agreement, is there any penalty?).  And if you prefer mediation or arbitration as a solution should one party breach the agreement, then a paragraph spelling out the way to settle the differences should be negotiated.  Finally, the agreement should be signed and dated by all parties.

Of course, this is a general description of a vendor agreement and before entering into such an agreement you may want to seek further advice.  Do you have contracts with your vendors?

If you would like more direction on your small business, contact us today to schedule your comprehensive Business Building Benchmark.  As your personal legal advisors we will identify any liability issues you may be facing and what you need to do to fix them. Normally, this session is $1250, but if you mention this blog post and we still have room on our calendar this month, we will waive that fee.

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