Vendor Agreement

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A vendor is also known as supplier or service provider. A vendor agreement is a contractual arrangement between two parties, out of which one is a goods or service provider and the other is the client company. This agreement entails the terms and conditions that govern the purpose for which the service provider has been hired, the consideration or payment for such goods and services, the mode, and instalments in which such payment is to be made etc.

It is used when a company hires or appoints an individual, a retailer, a service provider, or any other firm for the supply of goods and services.


The Vendor Agreement entails the following clauses:

  1. Identification of Parties:The agreement begins by identifying theclient company and the goods or service provider.
  2. Purpose and scope of work: It then should define the work and purpose for which the vendor is being hired or appointed.
  3. Compensation: It should provide for the consideration, remuneration or compensation against which the goods or services are being consumed by the company. It should ideally also enumerate upon the mode, instalments, conditions etc. for such payment.
  4. Termination: it should provide as to when the agreement would cease to operate. It may be time based and terminate after the duration of the agreement has ended, or it could be work based and last until the performance is complete or the project is finished. On the alternative, it may also operate on a perpetual basis, subject to termination by notice.
  5. Indemnity: this cluse is for protection of both parties against losses arising from such arrangement and from the services which are being provided here under
  6. Other details: it should specify as to the timelines, or periods in which the vendor has to offer his goods or services. It should also specify other expectations like the usage of raw material, the specifications of the product or service, the statement of work, the mode and method of delivery etc. The more detailed the agreement, the better.


  1. The agreement establishes a legal obligation on both parties to perform
  2. It helps streamline the business relationship
  3. It offers protection against defaults
  4. It removes ambiguity in the contractual arrangement


Various licences that the vendor requires as per law should be verified and annexed to the agreement

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