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Vendors and their customers are the cornerstones of business - and those relationships are almost impossible without vendor agreements. They govern the terms under which a vendor provides goods or services to a client or business, and they set the foundation for a fruitful relationship that empowers both sides of the arrangement to thrive.
In this deep dive on vendor agreements, we'll explore: what is a vendor agreement? What are they for, when do you need them, what should be in them and how can you manage them at scale? Let's get started.
A vendor agreement is a legally binding contract between a business and a supplier or vendor, which outlines the terms and conditions under which the vendor will provide the goods or service. 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.
A vendor agreement typically covers aspects such as product or service details, pricing, delivery timelines, quality standards, contract payment terms, and dispute resolution mechanisms. This type of contract can also be known as a supplier agreement or supply agreement, depending on the specifics of the document.
A vendor agreement comes into effect once both parties— the vendor and the buyer— sign the document, indicating acceptance of the terms and conditions that the agreement contains. Once in effect, the vendor agreement 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 which goods or services the vendor will 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 amount set out in the contract (the consideration) in exchange for the vendor meeting these stipulations.
At its core, 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 can turn to various remedies, including termination of the contract or legal action.
A 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's sensible 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 clear to both sides, 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 your vendor agreement template include? We've listed ten of the most common sections below. You can also dive right in and get started with our free vendor agreement template PDF above.
This information usually appears near the start of your vendor 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 (for example 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, you might need an appendix or even a separate statement of work to cover the services intended to be covered.
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 (for example upon delivery, within 30 days of invoice, and so on), and the method of payment. If there are any late payment penalties, discounts, or other special payment conditions, these should be documented as well. Payment terms are a really important part of the document, as friction or disputes can often be traced back to payment issues,
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 here too.
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. Vendor contracts automatically renewing is a common pain point in enterprise contract management - read more about how you can avoid that happening with Juro's contract tracking features.
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 assurance standards.
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 (meaning the jurisdiction whose laws will govern the agreement) and the venue for any legal proceedings should also be defined here.
If the vendor will have access to confidential information, a confidentiality or non-disclosure clause is a must. 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.
Including all of these components in your vendor agreement template will help to 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 and procurement 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:
For more tips and tricks on vendor agreement management, check out these other guides and resources:
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 - and say goodbye to painful vendor agreement admin forever.
A vendor agreement is a contract between a business and a vendor that supplies it with goods or services. It sets out what the vendor will provide and what the buyer will pay, along with delivery terms and what happens if either side falls short.
Usually, yes. Even small purchases can go wrong, and without an agreement there's no agreed position if prices rise or deliveries arrive late. For repeat purchases, one agreement can cover every order, so you only negotiate the terms once.
The two overlap heavily, and many businesses use the terms interchangeably. Where a distinction is drawn, a supplier agreement usually covers goods or raw materials, while a vendor agreement more often covers services or software. The drafting points are largely the same either way.
Ask for a fixed price for the term, or a cap on how much the vendor can raise prices at renewal. Set the payment window and tie payments to delivery or acceptance where you can, so you're not paying for work that hasn't arrived. Payment terms are a frequent source of friction in vendor relationships, so make sure late payment charges and invoice disputes are covered too.
The agreement should set measurable service levels or quality standards and say what happens if the vendor falls short. Common remedies include service credits and, for repeated failures, the right to terminate. If performance standards are detailed, a separate service level agreement can sit alongside the main contract.
It's a good starting point, but you'll need to adapt the scope and delivery terms to what you're actually buying. Check the renewal clause carefully, because automatic renewals with long notice periods can lock you in for another term. For specific legal advice on your contract templates, consult an attorney.
Build the template in Juro once and let procurement generate each vendor agreement from it, filling in the vendor details and pricing for every deal. When legal updates a standard term, such as the liability cap, every new agreement follows that one template. Signed agreements sit in one searchable place, with reminders you can set for renewal dates, so contracts don't roll over unnoticed.
Yes. Operator, the AI drafting feature in Juro, can create a new vendor agreement template using what it learns from your existing contracts, including your drafting style and the positions you normally take on payment and liability. Your legal team approves that first draft before procurement uses it, so the template reflects your risk appetite.
Answer
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