Vendor agreement template
Securing new customers can be difficult for vendors. Use this free vendor agreement template to streamline the process.
Securing new customers can be difficult for vendors. Use this free vendor agreement template to streamline the process.
Vendor agreements are pivotal for the successful operation of various business transactions and interactions. They govern the terms under which a vendor provides goods or services to a client or business.
This article will explore the intricacies of vendor agreements, explaining what they are, how they work, when to use them, their crucial components, and how they are typically managed.
A vendor agreement, also known as a supplier agreement or supply agreement, is a legally binding contract between a business and a supplier or vendor.
The vendor, in this case, refers to an individual or business providing goods or services to another business, while the buyer (also known as the purchaser) is the entity receiving these goods or services.
This contract outlines the terms and conditions under which the vendor will provide the goods or services. It covers aspects such as product or service details, pricing, delivery timelines, quality standards, payment terms, and dispute resolution mechanisms.
The operation of a vendor agreement is straightforward. The agreement comes into effect once both parties— the vendor and the buyer— sign the document, indicating acceptance of the terms and conditions stipulated therein. It then governs the relationship between the two parties, setting out their respective rights, obligations, and responsibilities.
Typically, a vendor agreement includes a scope of work that specifies what goods or services the vendor is to provide, as well as any key performance indicators (KPIs) or service levels that the vendor must meet. The buyer is often obliged to pay the agreed-upon sum in exchange for the vendor meeting these stipulations.
In essence, the vendor agreement works as a blueprint for the business relationship, providing a clear framework within which the vendor and the buyer interact. If either party fails to meet their obligations under the agreement, the other party may have recourse to various remedies, including termination of the contract or legal action.
Vendor agreements should be used whenever a business plans to engage a vendor for goods or services. This can range from procuring raw materials, to hiring a contractor for a specific project, to engaging an IT service provider. Even for small transactions, it is prudent to have a vendor agreement in place to protect both parties.
These agreements are particularly crucial when entering into significant or long-term business relationships. They ensure that the terms of the relationship are clearly articulated, reducing the potential for misunderstandings or disputes down the line.
We've covered what a vendor agreement is and how it works in practice. But what should a vendor agreement template include? We've listed ten of the most common sections below.
This forms the very beginning of the contract. It should clearly identify who the vendor and the buyer are. This often includes the legal names of the entities, their type of business structure (e.g., LLC, Corporation, Partnership), and their primary place of business.
The agreement should detail the specific goods or services to be provided by the vendor. This includes the quantity, quality, specifications, and any other details that pertain to the work. For complex or large-scale services, it may be prudent to include an appendix or exhibit that lays out the scope of work in detail.
The agreement should clearly specify the price for the goods or services provided. The payment terms should be outlined, including when payments are to be made (e.g., upon delivery, within 30 days of invoice, etc.), and the method of payment. If there are any late payment penalties, discounts, or other special payment conditions, these should be documented as well.
This section should detail the obligations of the vendor in terms of the delivery of goods or services. It should specify the date or schedule of delivery, the method of delivery, the location, and who bears the risk of loss during transit. If there are any penalties for late delivery, these should be mentioned.
The agreement should state the start and end date of the contract. If it's a recurring or ongoing agreement, the terms and conditions for contract renewal, and any notice periods for termination, should be detailed.
The vendor agreement should specify the performance standards, key performance indicators (KPIs), or service levels that the vendor is expected to meet.
This could include factors such as response times, uptime percentages, delivery timelines, and quality thresholds.
Clauses that describe the consequences of not meeting these KPIs (such as penalties or the right to terminate the agreement) should also be included.
This section should outline the conditions under which either party can terminate the agreement. This may include breach of contract, failure to deliver, insolvency, or it could be 'for convenience' (i.e., without a specific reason), typically with a notice period.
The agreement should specify the procedure for resolving disputes that may arise between the parties. This could involve negotiation, mediation, arbitration, or litigation.
The choice of law (i.e., the jurisdiction whose laws will govern the agreement) and the venue for any legal proceedings should also be defined.
If the vendor will have access to confidential information, a confidentiality or non-disclosure clause is crucial. This section should define what constitutes confidential information and stipulate the obligations to protect that information and the consequences of unauthorized disclosure.
This section provides protection in the event of losses or damages caused by a party’s actions. The vendor, for instance, might agree to indemnify the buyer for any damage caused by faulty goods.
All of these components of a vendor agreement template provide clarity about the transaction and ensure that both the buyer and the vendor's interests are protected.
To recap: we've covered who takes care of vendor contracts and what goes into a vendor agreement template. But how are vendor agreements traditionally managed?
Well, it largely depends on which tools they use and whether or not they have a ready-made vendor agreement template.
Teams dealing with vendor agreements typically use a bunch of different tools. They:
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This process is repetitive, admin-heavy, and it leaves lean legal teams buried in low-value work. There's also a lot of friction throughout the process since vendors and buyers are forced to jump back and forth between up tp five different tools just to get a contract over the line.
Fortunately, there's a way for vendors and buyers to streamline the vendor agreement management process. This can be done by automating vendor agreements (and their admin work) in Juro.
Juro's flexible, collaborative and data-rich contract management platform enables businesses to manage vendor agreements from end to end without leaving the platform.
Juro also empowers vendors to safely automate up to 75 per cent of routine contract admin. This is achieved through the following features:
If you're interested in joining the 6000+ companies already using Juro to power their contracts, hit the button below to book your personalized demo of the tool.
For more tips and tricks on vendor agreement management, check out these other guides and resources:
Juro is the #1-rated contract platform globally for speed of implementation.
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