Vendor Contracts – Protect Yourself with These Tips

Working with vendors is a fact of life for many businesses. Even though it might seem routine, entering into contracts with vendors isn’t something to be taken lightly. With that in mind, there are several common mistakes to avoid when entering into a business relationship with any vendor.

Not Being Sufficiently Specific About Vendor Responsibilities

Not being sufficiently specific about vendor responsibilities is a broad category and for this reason, it is often one area where it is important to be precise. Ultimately, if a vendor does not to meet its contractual responsibilities, it is important that an organization has the legal protection to be able to severe a business relationship.

Some features to include in any vendor contract are:

Deadlines and penalties. When contracting for services it is critical that you include specific timelines for completion of the work. For example, a statement of deliverables along with a timetable should also include any penalties.

Clearly Defined Terminology. Do not make the assumption that everyone who will read the contract will understand every term or provision. Make sure to look at every area of a contract that is ambiguous or has the possibility of being misunderstood and make sure that each item is clearly defined.

Consistency within the Contract. Look for inconsistencies within the contract that hold the possibility of being defined or interpreted differently in the event of arbitration.

Language Covering Unforeseen Circumstances. When it comes to being able to meet deadlines and provide deliverables, no one likes surprises. Unforeseen circumstances are a part of life. However, if your business, or that of your vendor, is affected by fluctuating external factors such as the weather or the economy, then it is important that the contract address unforeseen and unpreventable delays that could result. This might include language related to how long a price will be valid in the event of an unforeseen delay, and/or whether it will need to be re-negotiated.

One way of making sure a vendor contract addresses these issues is to have the benefit of a third party review. That way, both you and a vendor will have a better idea of where you both stand in terms of being both productive and protected.

Importance of Having an Attorney Review Your Contract

A significant portion of our business practice involves drafting, revising, and reviewing contracts, and we frequently receive requests for contract reviews from prospective clients.  All too often, however, this review is requested after the contract has already been signed, at which point we can only provide information and clarification regarding the agreement which is already in place.  As one might imagine, this is not the ideal time to seek a contractual review.  By consulting with an attorney BEFORE actually signing a contract, one can ensure the document fairly and accurately represents the intent of the parties signing the agreement.

While many contracts, such as credit card receipts, are never expected to be read, let alone reviewed, any agreement involving a significant amount of money or time should be reviewed by an attorney.  Many contracts appear to be standard “boilerplate” or non-negotiable, but this is not always the case.  Frequently, with the help of a competent attorney, terms and conditions can be modified, added, or removed to protect your interests.  Occasionally, even inadvertent errors can be corrected to the benefit of both parties.  Having a contract reviewed by an attorney is a small price to pay in order to reduce or eliminate potentially significant future risk or exposure.

Most of the agreements you sign will have been drafted by the other party, and therefore will tend to favor the interests of that party.  An attorney can make sure your interests are also considered and protected, and can help explain, modify, or eliminate the confusing “legalese” which is often illegible to most normal humans.  It is much easier and cheaper to address an issue before it becomes a problem.  When it comes to signing a contract, this could not be more true, as there is often nothing that can be done to modify a signed agreement.

When entering into any transaction which involves a significant amount of money or time, it is best to have an agreement in place that has been reviewed by an attorney.  Even if the other party does not offer a written agreement, it may be in your best interest to consult with an attorney to have an agreement drafted to document the transaction.  Proper preparation beforehand can help to prevent significant headaches and unexpected consequences down the road.