Vendor agreement template

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.

What is a Vendor Agreement?

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.

How does a Vendor Agreement Work?

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.

When do you need a Vendor Agreement?

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.

What should a vendor agreement template include?

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.

1. Identification of parties

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.

2. Scope of work

‍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.

3. Price and payment terms

‍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,

4. Delivery terms

‍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.

5. Duration of agreement

‍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.

6. Performance standards and KPIs

‍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.

7. Termination clause

‍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.

8. Dispute resolution

‍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.

9. Confidentiality and non-disclosure

‍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.

10. Indemnification

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.

What is the traditional vendor agreement management process?

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:

• Draft the contract in Microsoft Word or Google Docs
• Send the contract for internal review via Slack or Teams
• Share an updated version with counterparties via email
• Negotiate the vendor agreement with redlines in Word
• Convert it to a PDF 
• Move it into a separate eSigning tool (e.g DocuSign or Adobe Sign)
• Upload an copy of the executed contract to a shared drive (e.g Google Drive, Dropbox or Box)

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.

Can you automate your vendor agreement from a template?

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:

• Automated contract templates: Legal teams can create flexible vendor agreement templates that are fast and easy to change or reset in Juro’s rich-text editor. These can then be used to generate watertight contracts in just a few clicks.

• Conditional logic: Rather than making patchwork contracts for different vendors, Juro users can automatically add certain conditions to a vendor agreement based on the vendor's status.

• Integrations with vendor management platforms: Juro integrates with popular platforms, making it simple to pull data straight from vendor profiles into contract smartfields. This removes the need for manual data entry.

• Bulk actions: Juro’s bulk actions let vendor management teams create, autofill, and send out vendor agreements for signing on a large scale - ideal for companies that are growing!

• In-platform commenting: Vendor agreements can sometimes be confusing, but Juro’s in-browser contract negotiation features allow vendors to add questions and comments directly onto the contract for review.

• Mobile-responsive eSignature: Vendors can quickly sign their agreements as soon as they’ve read and received them, thanks to Juro’s built-in eSignature feature.

• Secure, data-rich contract repository: Vendor agreements can be stored securely in Juro's contract repository where they're easy to search for, query and track. Juro users can even set automated reminders for key dates in their vendor agreements.

Find out more

For more tips and tricks on vendor agreement management, check out these other guides and resources:

• Five tips to level up your vendor negotiations
• 9 vendor management best practices for 2023
• Free Service Level Agreement (SLA) template
• What lawyers want from tech vendors
• Vendor management: what makes a sophisticated buyer?
• A guide to CLM software for procurement teams

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.