Legal Agreements

Vendor Agreement: Underlining the Important Clauses

calendar02 Jun, 2021
timeReading Time: 4 Minutes
Vendor Agreement

The Vendor agreement is a legally binding document that encloses the regulation as well as provisions about work performed by the vendor. Such a contract is technically drafted for Consultants, technology, office supplies, services, etc. The clauses like objectives, goals, minimizing cost, and risk factors must be a part of such an agreement. This writeup will briefly describe the clause of the Vendor agreement.

Concept of Vendor Agreement

The term “Vendor Agreement” is nothing but a legal document that is signed between the vendors of goods & services and the business owner. Such a document is usually accompanied by a Statement of Work. The elements such as Date, time, location of service are the important part of this agreement.

It’s worth noting that this agreement comes under the ambit of the Indian Contract Act, 1872[1].

Key Requirements Regarding the Vendor Agreement

The essential requisites of a Vendor agreement are as follows: 

  • Date & details of the concerned parties, such as names and addresses.
  • Clarification regarding vending license to determine whether the said firm is permitted to engage with the product or not.
  • Draft a concise & brief statement about vendors’ expectations.
  • Tax’s imposition on services and products.
  • Inclusion of Delivery Details.

Read our article:Know the Difference between Shareholder Agreement & Share Purchase Agreement

Important Clauses of Vendor Agreement

Following are the vital clauses of the Vendor Agreement:

Clear Picture

The term “Clear Picture” briefly recites the particular product or services involved with the agreement.

Payment Terms

The Payment Terms implies the legit costing mechanism about:

Payment Terms

Period of Operation

The period of operation is arguably one of the most important clauses of the Vendor Agreement. Moreover, this clause predominately talks about the timeline for which the operations are valid and for how long it will sustain legality for the parties. On the other hand, the term “Period” implies the starting and ending date of the services.

Confidentiality Clause

As the name suggests, the confidentiality clause is all about information protection against possible data breaches. The conditions under such a clause prevent parties from misusing or sharing the contract information with third parties about permission.

Representations and Warranties

Yet another important clause of the vendor agreement. It talks about the terms & conditions of the contract. The said conditions should be error-free and not confuse the mind of the parties.  Due diligence of the same is a must for either of the parties.

Intellectual Property Clause

The Intellectual Property Clause is predominately presented by the business owner for coverage against the risks that are inherent with the intellectual assets of the firm.

Exclusivity Clause

The term “Exclusivity Clause” reflects the exclusive relationship between the business owner and the vendor as the product or service is important to the business.

Limited Liability

In the case of the vendors, the liability is fenced around the services’ cost. But there are instances when businesses encountered massive losses due to vendor’s negligence. Such a clause allows the business owner to claim for damages incurred by the vendor regardless of any reason.

Insurance Clause

In our nation, the insurance clause act as the basis of safety assurance for the individual involved in the contract.

Indemnity Clause

The term “Indemnification” denotes when one of the parties manifests the interest to bear all the losses brought by other parties under ambiguous cases.

Parties Relationship

This clause draws a line of distinction between the role of the concerned parties. However, this clause revolves around the role of the vendor and helps it to work as an independent contractor. The presence of such a Claus overcomes any ambiguity regarding the Vendor’s role and compels it to act within a legal limit.

List of Benefits under Vendor Agreement

The benefits of a Vendor Agreement are as follows:

  • Renders clarity regarding Vendor’s limitation.
  • Specifies the business requisites.
  • Reduces legal conflicts and future risks.
  • Briefly outlines the procedure of Vendor compliance.

Key Elements regarding the Vendor Agreement

Following are the key elements of the Vendor agreement:

  • Briefly recites the goods and services that shall be offered.
  • Encloses viable payment modes.
  • Highlighting the mode in which clients shall be billed.
  • Manner of coordinating the client for Account Payable details.
  • Includes SOW i.e. Statement of Work.
  • Provides knowledge about the legal requisites and state laws.
  • Insurance
  • A vendor does not have access to any type of Employment Benefits.
  • Help in manifesting vendor as an independent contractor.
  • Conditions about the Vendor agreement’s termination.
  • Payment or Reimbursement regarding Attorney fees.

Process for Drafting the Vendors Agreement

Following are the steps that will help you draft a vendor agreement:

  • Firstly, hire a professional, an advocate with ample experience would be better.
  • After that, the lawyer shall send a drafted vendor agreementto copy for review and approval.
  • The vendor agreement must enclose suggested presented by the parties involved.


A Vendor agreement is of paramount importance for businesses because of its ability to fenced disparities that might disrupt the client-vendor relationship. Thus, it can be concluded that it’s the vendor agreement that keeps the conflict out of the equation and harnesses transparency.

The people in the business domain should act cautiously while selecting vendor agreement templates online. It may sounds plain and simple at the first glance, but believe it or not,  it is more than that. It worth noting that most online templates consolidate basic clauses. Now, this is against the requirement of some businesses that are dealing with complex vending management. At least, one thing has been confirmed from the above that the drafting of the Vendor agreement seeks a different level of professionalism. So in case, you seek any help regarding this, then make sure to have a correspondence with CorpBiz’s expert.

Read our article:What are the Important Facts Related To Commercial Lease Agreement?

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