50+ Sample Vendor Agreement Templates

What Is a Vendor Agreement?

First things first, a vendor refers to any business or simply a person who is obliged to supply any product or service to a particular company. This vendor, also called a supplier, must carry out the terms given by the client or business. And how can both parties come up with an official deal? They write the terms and conditions under a vendor contract or agreement. Thus, the vendor agreement, usually in a standard agreement form or letter format, covers the details of who supplies and receives exclusive goods and services in a deal. And most importantly, the document contains the terms, rules, and content that must be followed by parties.

A report confirmed that Total consists of around 150,000 suppliers, Walmart has approximately 100,000, and Proctor and Gamble has over 75,000.

According to Statista, the US had over 2,072 manufacturing businesses in 2015.

Vendor Agreement: Why Is It Important?

In business, vendor agreements are crucial because, just like most agreements, they outline the basic details about the products and services provided, as well as the terms or conditions. So, the agreement or contract clarifies any negotiation between parties. And lesser chances of conflicts occur since every party will be aware of the objectives and how to manage risks. More so, the document serves as evidence if there are factors to clarify regarding the agreement because the significant info is written.

Furthermore, vendor agreements work in different fields. You can rely on its document to deal with office supplies, exclusive services, consultations, event planning, marketing strategies, and a lot more. And one of the most common applications of vendors is in the manufacturing industry. In America, for example, there were about 2,072 manufacturing establishments in 2015. With many businesses that rely on vendors, the process can be risky. Thankfully, the vendor agreement helps monitor vendors, especially in a large supply base.

What Are the Provisions of a Vendor Agreement?

What makes the vendor agreement reliable is its stipulation of provisions and terms. So, your next document must also contain the essential segments that make an agreement valid. Also, you can prepare a checklist to start deciding which of these provisions will you add to your agreement. And without further ado, here are the common provisions of a vendor agreement:

Scope of Services: You already know that vendors provide something. So whatever it is, specify it in the agreement. A detailed description of the product and scope of services will work as a statement of purpose, meaning whoever reads the form will get the gist about what the provision is. And failing to clarify this part already makes your document null.Relationship of Parties: What is the relationship between the client and the supplier? Describe that in detail. Always remember that identifying the parties is part of the formalities in a contract. And don’t forget to label the vendor appropriately if you are referring to a business or maybe an independent contractor. Also, is the vendor authorized to represent the other party or not? Note it.Payment Terms: One of the important clauses is the payment agreement. In this section, calculate how much the products or services are. You also state the payment schedule, recipient name, and payment method. Most importantly, mention the penalties if ever, clients pay late. It is unfair if vendors are the only ones being responsible for supplying clients anyway. Therefore, clients must be financially responsible too.Termination: In case any party fails to perform their duties, penalties commence. But if penalties continue, the agreement may stop. Hence, write in the document about what actions will lead to termination. This section is also where you state when the deal starts and ends. And if an agreement expires, indicate what can be done for renewal. Deliverables: What deliverables are under the agreement in the first place? Jot this info down if there are deliverables. Moreover, spell out the owner’s name and if these owners are for hire or not as a clarification.Representation and Warranty: A vendor can provide representations or warranties, and such details must be noted in the agreement sheet. For example, the warranty can state what goods or services provided conform to particular stipulations. It is also vital to clarify what services given by suppliers can fulfill company standards. And to agree with the terms in this segment, all parties better talk and negotiate first.Liability Limitation: Don’t ignore the importance of the limitation of liability clause. In case damages occur, whether directly, indirectly—you name it, decide what to include and exclude from the party’s liability. Furthermore, is there any payment in settling a party’s liability? Decide on this final arrangement with everyone involved first.Intellectual Property: Some agreements incorporate intellectual properties. If it is needed, then be sure to state the intellectual property owner, its function, and the license or limitations given to whoever uses that property. Give clear terms as well to prevent any possible disagreement about this subject.Confidentiality: Think carefully if there is any confidential matter not to disclose in a vendor agreement. If yes, then include a non-disclosure or confidentiality agreement to your terms. Manage this part by defining what is confidential in the agreement, how long the info should be protected, and what are the dos and don’ts about it. Indemnification: What is also important when any agreement issue leads to litigation is indemnification. For example, a food vendor has caused a breach of contract. And to prevent the business or management to file a case in court, the vendor may compensate through indemnification.Insurance: Does the vendor hold any insurance? Learn more about it because there could be useful insurance available. There are even legal services where vendors deal with insurance involving errors and omissions. So, identify what works in your application.

How to Make a Basic Vendor Agreement

You might ask, “How should I create a decent vendor agreement?” Fret no more because it is not that difficult. Allow a step-by-step guide to help you tailor the agreement’s content, provisions, format, and so forth. In this section, we will discuss to you the easy steps on how to make a standard vendor agreement:

Step 1: Open with an Introductory Statement

Your agreement should begin with the introductory statement. Immediately giving the provisions and terms is informal because whoever reads the agreement form should know about the basic details first. So for your introduction, discuss what the agreement is. Ensure that you stated the label “vendor agreement” here. Next, recognize each party by stating the legal name or business name of the vendor and the client.

Step 2: Insert the Relevant Provisions

Can you still recall every vendor agreement provision discussed before? Slowly insert those elements in your agreement template. Those factors will shape your document to be identified as a vendor agreement. However, don’t just add every example if some provisions are unnecessary. Maybe warranty and intellectual property are irrelevant to your application. Remember that each vendor agreement differs since it depends on what parties agree with. Instead, insert only the relevant components to the sheet.

Step 3: Arrange the Content

Did you finish inserting those vendor agreement provisions? Great. Your next focus is to arrange all information accordingly. Binding agreements come in clauses or groups anyway. Hence, each clause should contain its relevant details only. An example is a termination clause. Don’t write the insurance terms or scope of services under that termination clause since they have a specific group for that.

Step 4: Be Specific

Review your words and sentences carefully if they are straight to the point. The problem with other agreements is when sentences are difficult to understand and quite wordy. Be direct instead. You would not want whoever is expected to sign the form to be confused about the details inside anyway. For example, you might have said, “To provide supplies every end of the month.” What supplies are you talking about? Office equipment, dairy products, or perhaps, loads of apparel? Therefore, being specific is vital.

Step 5: End with the Signature Lines

What completes an agreement form? Signatures. Although signatures are not always required, adding them to the document is still better. By having parties sign, those marks will acknowledge that such people understood and will promise to abide by these terms at all times. So if you are already confident that every detail inside the vendor agreement sheet is understandable and informative enough, then submit it to be signed.

FAQs

What are the types of vendors?

The types of suppliers or vendors differ according to their corresponding duties in supplying particular products and services. And the four major types consist of the following:

  • Maintenance or service providers who perform specific services
  • Wholesalers who sell products to other businesses
  • Retailers who sell goods to individuals customers
  • Manufacturers who create products out of raw materials

How many vendors do you need?

The answer depends on you. But don’t decide randomly. Think of your business if it can manage to deal with various vendors. And does your company have the budget for it too? Make strategic plans first and decide if having many vendors will be feasible and profitable for your company.

Is registration required from a vendor agreement?

No, registration is unnecessary because signing the agreement sheet already works.

South African software engineer Theo de Raadt inspired us with the quote, “The primary goal of a vendor is to make money.” Indeed, and that quote proves why a lot of companies engage with a thousand suppliers. However, making money is only a fragment of what you see from successful businesses and vendors. The big picture often happens behind the scenes, like in seeing how vendors and clients work well together. So if you want to grow your company, manage your relationship with your suppliers, starting with a well-thought-out vendor agreement.