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.