No one, and definitely no business can exist in isolation. Hence, demand and supply is at the core of every business, whether what it offers is goods or services, and at the very center of this is vendors. Vendors are persons or other businesses hired to provide products and/or services, be it on a one-time or ongoing basis. Vendors are usually contracted by businesses to supply products or services that are very critical to their own smooth operations. Be it for event planning, software programming, consultants, technology services, office supplies, equipment repair and maintenance, internet and phone services, raw materials for your products, or even marketing, the success of your business depends on different vendors fulfilling their promises and expectations.
To keep the demand and supply chain active and without friction therefore, a vendor agreement is of utmost importance. A vendor agreement clearly defines and describes all the expectations, goals, duties and responsibilities of parties to the agreement, and clearly minimizes or extinguishes conflicts while expressly stating consequences of breach.
A typical vendor agreement must contain certain provisions, but every agreement is peculiar. Each agreement must have provisions designed to the specifics of that particular business arrangement, otherwise, you would have included superfluous provisions and left out critical ones. Some of the provisions that should be included in every vendor agreement include, but not limited to:
- A clear description of the products, or scope of the services being provided.
- A clear definition of confidential information and its scope. (A separate NDA may be executed by parties)
- A clear expression of dates, deadlines and milestones.
- Price and payment terms.
- Terms of the engagement, termination thereof and consequences/remedy for breach.
- A clear provision of who owns any intellectual property created under the agreement, and terms of licensing and use.
- Statement of representations and warranties.
- Disclaimer, indemnification and limitation of liability.
- Relationship of the parties.
A well prepared vendor agreement is of immense benefits to both parties, as it:
- Reduces risks.
- Protects you and your brand.
- Optimizes business performance.
- Fosters administrative efficiency.
- Fosters sustainable relationships between contracting parties.
Drafting and executing a Vendor Agreement may not be the first thing you think of when you are creating or growing your business. Yet, agreements are indeed the foundation of business relationships, and they ensure operations continue without interruption. On the other hand, if things go south, lack of a Vendor Agreement or a poorly prepared one can bring a business’ operations to a total halt, and can indeed place it in an extremely vulnerable position. (Click here to contact a lawyer for a solid vendor agreement)
Being conscious of the essential elements within Vendor Agreements ensures you are building a strong foundation for your business to operate smoothly upon. (Ironclad)
One thought on “WHY SHOULD YOU EXECUTE VENDOR AGREEMENTS AS A BUSINESS OWNER?”
Indeed! This is an eye-opener
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