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4 Things Vendor Agreements Should Contain

Let’s face it. To run your business, you need vendors who can help with any number of services or items that are critical to your operations but are not in your area of expertise. While many vendors are moving toward standard form contracts for the sake of uniformity and consistency, it is still possible to have a negotiated contract with a vendor. Regardless of whether your vendor is asking you to sign a standard contract or you have some negotiating room, here are the things that should be in the contract for it protect you and keep your business running smoothly.

1) Scope of the services or products. When it comes right down to it, the most important thing that a contract must convey is what exactly the vendor will be doing for your business or supplying to your business. Specificity here is paramount because when parties do not specify, mistakes will likely occur. This also serves to protect you as well as the vendor because it makes it clear from the start what you are requesting and what the vendor is expecting to provide.

2) Price and how it will be paid. A valid contract must have some form of consideration (price) being given in exchange for the performance by the other party. Even if the price is being paid in a form other than currency, for example, in kind contributions or debt forgiveness, this must still be specified in the contract. The other part of this equation is that the method and timetable of payment must also be spelled out. If only a portion of the price is paid upfront with subsequent payments being due later, this must be spelled out in every detail. Again, this is to protect you and the vendor from misunderstandings that could lead to litigation.

3) How to get out of the contract. All good things must come to an end and contracts are no different. At least with contracts, you can specify the conditions under which you are able to walk away from the relationship and how your exit may be handled. Some contracts will expire upon the completion of the particular project or the delivery of the product. Others may last indefinitely as long as the parties do not object. Still others will last for a definitive amount of time before each party agrees that it terminates on its own.

4) What happens if someone doesn’t follow the contract. The technical term for this is “breach,” as in, if your vendor breaches their portion of the agreement, you should have in the contract some clause that discusses whether they can fix the breach (cure) or if it is a breach of such magnitude that you can get an automatic out from the contract. Note that this will also be the section where some vendors will include their terms for how to settle disagreements, which for larger vendors will likely be arbitration rather than through litigation. This may not be something you can negotiate, but you can at least know going in that this is what you will have to deal with.

There is a reason why lawyers, including the lawyers of the Trembly Law Firm, love contracts so much and it is because a really good contract is one of the best protections that you can have in dealing in the vast, impersonal world of vendors. Let Trembly Law Firm review or negotiate your vendor contracts and get a step ahead of the competition. Contact us today to get started.