Business Law 101: The Importance of Vendor Agreements

A vendor agreement, or vendor contract, is an important document because it identifies the terms and conditions of a relationship with a specific vendor. This includes things like identifying what services or goods will be provided, the price of these items, dates for delivery, and much more. These agreements can be made for a one-time event, or a long-term agreement. Taking the time to understand why vendor agreements are important will help you to determine when they are needed.

Establishing Services & Prices

The main portion of a vendor agreement will list all the details of the transaction regarding what products or services are going to be provided, and how much they will cost. This is important for both parties since it will allow them to plan in advance what needs to happen, and budget for it. When there is only a verbal agreement, everything is left open to interpretation or misunderstandings.

Confirm Privacy & Other Details

A vendor agreement can help ensure that specific requirements, such as the level of privacy needed, are clearly identified in writing. This is critical for cases where a vendor is working in an area with sensitive information or work being done.  An example of this could be a cleaning company that works in a financial institution. The cleaners may find or see confidential information, and having a vendor agreement can state that all the cleaners must sign a confidentiality agreement for added protection.

Detail Consequences of Failure to Meet Obligations

Another reason why a vendor agreement is important is because it details the consequences of what happens if the vendor fails to meet obligations. Businesses today rely on vendors for many things, and if they do not meet their obligations it can cause some very costly issues for the business. A vendor agreement can require that the vendor pay a certain amount in penalties if they are unable to meet their obligations, which is an important safeguard for businesses.

Don’t be Left without a Vendor Agreement

If you don’t have a vendor agreement in place, it is difficult to prove anything in the court of law. Not only does this make it more difficult to win a case, but it also makes a vendor less likely to negotiate if something goes wrong, since they will be more confident that the courts will side with them. Of course, being without a vendor agreement also leaves all parties much more exposed to the risk of misunderstandings, which are never good for anyone. If you would like to have a vendor agreement written up for you, please contact APH Law today.

Written by APH Law PLLC


When we founded APH Law PLLC in 2010, we did so out of a desire to connect business owners with more and better opportunities. No matter what industry you’re operating in, creating a strong foundation, preparing for the future, and protecting against challenges are key to long-term success. It is this kind of support that we take tremendous pride in helping businesses.