Business Law 101: The Importance of Vendor Agreements

If you own a business, there is a high likelihood that you have needed, or will need, a vendor or service provider for various aspects of your business. A vendor is someone who sells goods and services to businesses and includes anyone from an internet and telephone provider to a website designer. So what exactly is a vendor agreement? Why would you need one and what should be in it?

The Vendor Agreement

A vendor agreement, or vendor contract, is a legal agreement that clearly states the provisions and conditions of the work to be performed by a contractor. In other words, it is a contract that will include several key points such as date, time, and location where the services must be provided.

What are they used for?

Having a vendor agreement in place for every vendor you deal with is important because it provides protection from future issues by helping to set the expectations between the parties when it comes to things such as the type and quality of services provided, the duration of services, the cost and payment terms, and liability issues if something goes wrong.

Provisions to Include

Although there are many different forms of vendor agreements and each depends on the type of service you are engaging the vendor for, there are some basics that should be in every kind of agreement. These include:


  • Goods or Services: Since you are looking for a vendor because your business needs a particular service or good, the agreement should clearly explain exactly what is being purchased.
  • Payment Terms: After a description of the goods or services, this is the next most important provision to include. It can be structured in several different ways such as by completion of specified milestones, monthly, or in a lump sum at the beginning or end of the entire contract. However you decide to structure it, be sure that the total cost and time that each payment is due is unequivocally clear to avoid any potential conflict between you and the vendor.
  • Term/Termination: The term defines how long will the contract will run and termination will explain how each party can get out of the relationship. Generally, the term is for a fixed period or, alternatively, until the services are completed.
  • Representations & Warranties: This section is important because it sets out specific representations and warranties that a vendor should be comfortable making before entering into the contract such as: ability to enter, that nothing will infringe on intellectual property rights of third parties, and that the vendor has the necessary qualifications and expertise to perform the services.
  • Confidentiality: If you plan to share sensitive information with the vendor, it is prudent to include a confidentiality provision. This provision will make it clear that any information shared cannot be disclosed to anyone else and it may not be used for any purpose other than for the contracted for purpose of performing the services as described in the agreement.
  • Limitation of liability and Indemnification: This is necessary to include in case something goes wrong. Indemnity is a contractual provision where one party agrees to cover the losses of another party in specified circumstances.


As a business owner, you undoubtedly have needed to contract for services or goods outside of your business. The Law Office of Jack Sturgill has over 40 years experience helping Maryland business owners like you navigate the complexities of running a business. Contact us today at 410-296-6485 to see how we can help you.

The Law Office of Jack Sturgill has decades of experience helping clients that have been involved in personal injury cases. If you have been involved in an accident and need help in determining your rights, contact us at 410-296-6485 to discuss your claim.