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Vendor agreement: How-to guide

Businesses of all kinds rely on vendors to support their daily operations. Whether it's a restaurant, an event planning company, an e-commerce platform, or a brick-and-mortar store, partnerships between vendors and businesses are essential for providing services, delivering goods, and selling products. Both parties establish a mutually beneficial vendor agreement to ensure a successful collaboration. 

Who is a vendor?

A vendor, also known as a supplier, provider, or seller, is a person who gives goods and services to another person or a business in exchange for payment. 

What is a vendor agreement?

Template for a vendor agreement specifying the terms between a vendor and buyer.

A vendor agreement (or supplier agreement) is a document between a business owner and a vendor or service provider to supply products and services. This entire agreement addresses the extent of the services rendered, their duration, price or cost, and each party's responsibilities. It also outlines the guidelines that both parties must abide by.

What are the advantages of vendor agreements? 

Here are the advantages of a vendor agreement:

  • Builds a strong relationship between the vendor and the business
  • Describes the vendor's duties, rules, and regulations
  • Identifies risks and better management of vendor
  • Reduces the likelihood of fraud or scams by both vendors and businesses
  • Protects the business from any losses brought on by the parties' unlawful behavior
  • Accelerates the tasks and responsibilities
  • Increases efficiency of both parties

How do I create a vendor agreement? 

Vendor agreements change based on the vendor and the services they offer. Hence, contact your attorney if you require legal support to draft this document. 

However, there are specific components that might apply to all vendors who agree to work for a business. Let us learn about the different sections in a vendor agreement in depth:

1. Introduction

In this first section, you shall provide basic details about the agreement, such as the date the agreement was drafted, your company name and address, the vendor's company name and address, the contact information of both parties and their respective business details.

2. Services

Mention the vendor's services to your company, such as deliverables, timelines, etc. Once both parties provide consent, these can be elaborately written in a Statement of Work (SOW).

3. Fees

Here, the vendor should specify the costs for their services and the terms of each invoice the vendor shall raise. Also, state the mode of payment that the company might use to pay the vendor. 

4. Representations and warranties

Use this part to ensure that you have a warranty regarding the vendor’s service and professionalism, and the vendor hereby should abide by their rights at all times.

5. Intellectual property rights

This section defines the scope and purpose of intellectual property (IP) usage, such as copyrights, trademarks, design rights, and patents. Specify who owns and controls the company's IP.

6. Confidentiality

This space must specify the conditions under which either party may or may not share confidential information about the association, even after the agreement has ended. It should also include the consequences applicable to both parties when sharing the partnership's sensitive information.  

7. Indemnification

This provision outlines the procedure for addressing any losses, harm, failures, or penalties that occur during the agreement's tenure. This may involve the company or vendor assuming responsibility or both parties reaching a mutual agreement to hold each other harmless.

8. Limitation of liability

This clause protects the parties involved from unexpected circumstances. Each party must fully understand its liabilities and agree to the limits of such liabilities. For example, each party may demand not to hold them responsible for incidental or consequential damages that occur during the agreement’s term. Likewise, both parties may be held accountable for fraud, negligence, wrongful death, personal injury, failure, and other similar situations. 

9. Term and termination

Describe the terms of the partnership here. For example, explain the related process if one party has requested to extend the agreement.  

It also covers the conditions under which the agreement may be terminated, the representatives who may terminate it, and the effects of the termination.

10. Governing law

In this clause, state the country or jurisdiction whose laws will be followed to interpret the agreement.

11. Assignment 

This section specifies that both parties are prohibited from transferring their rights and obligations to a third party without obtaining written approval from the other party. For example, if the vendor can’t perform their duties and wishes to assign their rights to a third party, it must be done with the company's written approval.

12. Notice

In this section, add the mailing addresses of both parties that'll be used to deliver official paperwork physically or online. 

13. Relationship of parties

In this section, mention the relationship between the company and the vendor until the agreement is valid. Whether the vendor will act as an independent contractor or work as an employee of the company. 

14. Force majeure

This section outlines that parties can be released from their obligations if an uncontrollable disaster (such as a flood, earthquake, etc.) prevents them from fulfilling their responsibilities.

15. Amendments & modifications

This section mentions that both parties must approve any attempt to modify the contract terms; otherwise, the changes won’t be recognized as valid.

16. Entire agreement

This clause confirms that this agreement is signed and executed by the parties involved and states that it might replace any prior agreements or related documents between them.

17. Survival

This clause states that if specific rights and obligations of the parties are expected to continue even after the agreement’s termination, then it shall survive upon termination or expiration of the agreement.

18. Acceptance and signature

Once the vendor agrees to all the terms, this part is where both parties sign and provide their approval. This effectively seals the agreement with written consent and acts as the starting point of the partnership.

What are the benefits of LegalZoom’s vendor agreement template?

Typically, a vendor contract is a long and detailed document containing many clauses, sections, and terms that should comply with the laws. Creating such an intricate contract from the ground up every time isn't easy. A vendor template, which comes with structured and pre-drafted content, can prove convenient for creating such documents.

Try LegalZoom’s free vendor agreement template on this page. It is a written notice to the vendor containing all the information regarding the vendor’s duties. It provides carefully crafted and customizable templates to save time and expedite the process. 

By using this template, you can also leverage LegalZoom’s best features like:

Rich editor

By subscribing to LegalZoom’s paid plans, you can access the rich editor that can be used to modify your vendor agreement template based on your requirements. You can add new information or edit the existing information using the editor. It enables you to add various blocks, such as text, tables, images, etc., to the document using the drag-and-drop method. 

eSignatures

Utilize LegalZoom's fast, dependable, and secure eSignature service to sign and seal the vendor agreement at any time, on any device, without any hassles. You can download a .pdf of the signed agreement offline or print it later.

Tracking

Track the status of your agreement form in real-time with LegalZoom’s Activity feature and automated email notifications.

Conclusion

The vendor agreement is essential in onboarding new vendors to a business as it provides a standardized framework for establishing the terms and conditions between the parties. With the help of a vendor agreement template outlining the responsibilities, obligations, and expectations of both parties, you can ensure a clear and formalized business relationship. 

Frequently asked questions

What is a standard vendor agreement?

A standard vendor agreement is a formal document that details the terms & conditions governing the work that the vendor will execute. It is a contract that details the requirements for carrying out specific work. When drafting a precise vendor agreement, one should be very clear about the objectives and risk-reduction tactics.

What should be included in a vendor contract?

A vendor contract, also known as a vendor agreement, is a business agreement in which one party supplies goods and services, and the other party pays for them. 

A typical vendor contract/agreement shall include the following components:

  • Introduction
  • Services
  • Fees
  • Representations and Warranties
  • Intellectual property rights
  • Confidentiality
  • Indemnification
  • Limitation of liability
  • Term and Termination
  • Miscellaneous
  • Signatures
FREE

Free Vendor Agreement Template

Manage vendor relationships effectively with a comprehensive vendor agreement. Clarify terms, responsibilities, and expectations to foster productive partnerships.
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