Vendor Agreement Review
Don't get locked into bad deals. Our AI analyzes Supplier Contracts, SaaS Procurement, and Service Level Agreements (SLAs) to find hidden costs and auto-renewals.
What is a Vendor Agreement?
A Vendor Agreement comes into play whenever a business buys goods or services from another business (B2B). It covers the scope of supply, pricing, delivery timelines, and liability.
Small businesses often sign standard vendor forms without reading. This leads to issues like automatic renewals (getting stuck for another year), uncapped price increases, or zero liability for the vendor if they fail to deliver.
Procurement Team Checklist
Auto-Renewal (Evergreen Clause)
Does the contract renew automatically? What is the window to cancel (e.g., 60 days before expiry)?
Price Escalation Cap
Can the vendor raise prices anytime? Ensure increases are capped (e.g., max 5% per year) or linked to inflation.
Termination for Convenience
Can you exit the deal if business needs change, or are you locked in for the full term?
Service Level Agreement (SLA)
Are there penalties or credits if the vendor fails to deliver on time or meets quality standards?
Key Clauses to Negotiate
Unlimited Liability (Vendor)
Vendors often cap their liability at 1 month's fee. Ensure this cap is reasonable compared to the potential damage they could cause.
Auto-Renewal
"Evergreen" clauses renew the contract automatically unless you send notice. Set a calendar reminder!
Payment Terms (Net 30/60)
Ensure payment terms align with your cash flow. If you get paid in 60 days, don't pay vendors in 7 days.
Data Privacy (DPDP Act)
If the vendor processes your customer data, they must comply with India's DPDP Act 2023.
Frequently Asked Questions
What constitutes a "Breach of Contract"?
A material breach occurs when the vendor fails to deliver the core service or goods. Minor delays may not be material unless "Time is of the essence" is stated.
Can I cancel a vendor contract early?
Only if there is a "Termination for Convenience" clause. Otherwise, you may be liable to pay out the remainder of the contract term.
What are Liquidated Damages?
These are pre-agreed damages (penalties) the vendor pays if they delay delivery. It avoids the need to prove exact loss in court.
Does a vendor agreement need to be stamped?
Yes, in India, agreements must be stamped according to the state Stamp Act to be admissible as evidence in court.
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