There are several important elements that every vendor contract should include to ensure that all the parties involved understand their obligations. Clarity of language and intent also make the contract more easily enforceable if there’s a problem.
Knowing some of the basics that a contract with a vendor should cover can help you better protect your business from unnecessary issues.
8 essential elements
While every contract should be unique to the parties and circumstances involved, here are some key elements that should be included in any vendor contract:
- Descriptions of goods or services: The contract should clearly specify what goods or services the vendor is providing, with as much detail as possible.
- Payment terms: How much the vendor will be paid, as well as the payment terms, including when payment is due, how it will be made and any penalties for late payment, should all be covered.
- Delivery terms: If the vendor will provide goods, the contract should address when and how the goods will be delivered. If the vendor will provide services, the contract should specify when and where the services will be performed.
- Warranties and guarantees: The contract should say if any warranties or guarantees are provided by the vendor regarding the quality of what they provide. This is a critical protection that shouldn’t be overlooked.
- Liability and indemnification: The contract should indicate who is responsible if something goes wrong, including any limits on liability and provisions for indemnification.
- Termination and cancellation: The contract should spell out when the contract can be terminated or canceled, including any penalties or fees for doing so.
- Confidentiality and non-disclosure: If the vendor will be handling sensitive information, the contract should include provisions for confidentiality and non-disclosure.
- Governing law and jurisdiction: The contract should say what governing law and jurisdiction will apply in case of disputes. This is particularly important in a global business or with overseas vendors.
It helps to have experienced legal guidance when drafting or reviewing a vendor contract to better ensure that it is enforceable and provides adequate protection for all.