Writing a Preferred Vendor Agreement

Note: Want to skip the guide and go straight to the free templates? No problem - scroll to the bottom.
Also note: This is not legal advice.

Introduction

Drafting a preferred vendor agreement is essential for any business looking to maintain and protect the interests of both parties involved. Such an agreement allows for a transparent and legally binding relationship between the vendor and

Definitions (feel free to skip)

Establishing the scope of the agreement: The process of determining the parameters and limitations of the agreement.
Identifying the parties involved: The process of listing out all of the people or organizations that are a part of the agreement.
Outlining the responsibilities of the parties involved: The process of clarifying the duties and expectations of each party involved in the agreement.
Setting up payment terms: The process of outlining the payment amounts, payment schedule, payment penalties, and accepted payment methods.
Identifying any applicable warranties or guarantees: The process of determining what warranties or guarantees are applicable to the agreement and who is responsible for resolving any issues.
Addressing any potential conflicts of interest: The process of identifying any existing or potential conflicts of interest, and establishing a process for resolving any conflicts.
Identifying any applicable intellectual property rights: The process of defining who owns any created materials, and who has the right to use them.
Specifying any limitations of liability: The process of identifying any limits on liability, and setting up a process for determining liability.
Outlining any dispute resolution processes: The process of establishing a process for resolving any disputes, and identifying any dispute resolution methods.
Establishing termination conditions: The process of outlining when and how the agreement can be terminated, and specifying any termination fees or penalties.
Finalizing the agreement with signatures: The process of obtaining signatures from all parties involved, specifying the date of signature, and verifying the accuracy of all information provided.

Contents

• Establishing the scope of the agreement
• Defining the purpose of the agreement
• Identifying the parties involved
• Outlining the specific services and/or products covered
• Outlining the responsibilities of the parties involved
• Identifying who is responsible for what
• Defining the roles and obligations of each party
• Setting up payment terms
• Defining the payment amounts
• Specifying the payment schedule
• Identifying any payment penalties/late fees
• Defining the accepted payment methods
• Identifying any applicable warranties or guarantees
• Outlining what warranties or guarantees apply
• Specifying who is responsible for resolving any issues
• Addressing any potential conflicts of interest
• Identifying any existing or potential conflicts of interest
• Establishing a process for resolving any conflicts
• Identifying any applicable intellectual property rights
• Identifying who has ownership of any created materials
• Outlining who has the right to use created materials
• Specifying any limitations of liability
• Identifying any limits on liability
• Setting up a process for determining liability
• Outlining any dispute resolution processes
• Establishing a process for resolving any disputes
• Identifying any dispute resolution methods
• Establishing termination conditions
• Outlining when and how the agreement can be terminated
• Specifying any termination fees or penalties
• Finalizing the agreement with signatures
• Obtaining signatures from all parties involved
• Specifying the date of signature
• Verifying the accuracy of all information provided

Get started

Establishing the scope of the agreement

• Gather the necessary information about the vendor and their services
• Identify the services and/or products that need to be provided
• Outline the expected delivery timeframe and any applicable deadlines
• Describe the applicable geographic area
• Determine the scope of the agreement and the limitations (if any)
• Specify the terms of the agreement

Once the scope of the agreement has been established, the vendor and customer can finalize the agreement and move on to the next step.

Defining the purpose of the agreement

• Determine the purpose of the agreement, such as to set out the terms and conditions for delivery of goods or services.
• Outline the scope of the work and the expected duration of the agreement.
• Make sure that any mutual expectations are agreed upon and clearly stated in the agreement.
• When the purpose of the agreement is clearly defined, you can move on to the next step.

Identifying the parties involved

• Identify the parties involved in the agreement (e.g. vendor, customer, supplier, etc.)
• Make sure to include the full legal names of each party.
• List the contact information for each party (e.g. address, phone number, email address, etc.)
• Make sure you understand each party’s role and responsibilities in the agreement.

Once you have identified the parties involved, you can check this off your list and move on to outlining the specific services and/or products covered in the agreement.

Outlining the specific services and/or products covered

• List the exact services and/or products that the vendor will provide
• Identify the scope of services and/or products to be provided
• Outline payment terms for services and/or products
• Include any additional terms or conditions for services and/or products
• Specify any exclusions or limitations on services or products

Once all of these points have been addressed, you can move on to the next step of outlining the responsibilities of the parties involved.

Outlining the responsibilities of the parties involved

• Identify the roles and responsibilities of each party involved in the agreement
• Describe the duties of each party in relation to the agreement
• Outline the legal obligations of each party
• Make sure there is enough detail to establish the expectations of each party
• Ensure that the agreement is clear and unambiguous
• Once the roles and responsibilities of each party are outlined, you can move on to the next step.

Identifying who is responsible for what

• List out the names of both parties in the agreement
• Determine which party is responsible for each task that must be completed as part of the agreement.
• Make sure that both parties understand the respective roles and obligations for each task.
• Document the roles and obligations for each task in the agreement.
• Check that both parties agree to the roles and obligations outlined in the agreement.
• Once both parties agree to the roles and obligations, you can move on to the next step.

Defining the roles and obligations of each party

• Ensure that both parties are clear on their specific obligations in the contract
• Outline the scope of the relationship, including the services to be provided and the duration of the agreement
• List the roles of each party and the expected results
• Make sure to include any applicable laws, regulations, or standards that must be met
• Describe the processes and procedures for resolution of disputes
• Agree upon a timeline for reviews and updates
• Clarify the ownership and use of intellectual property
• Specify the roles and responsibilities for compliance with applicable laws

When you have completed this step, you should have a clear understanding of the roles and obligations of each party in the agreement.

Setting up payment terms

• Determine whether payments will be made in a lump sum or in installments
• Specify the timeline for making payments (including when the vendor will invoice, when payment is due, and any applicable late fees)
• Clarify which payment methods are allowed
• Outline any applicable interest rates
• Specify any applicable penalties and/or discounts

When you have determined the payment terms, you can move on to the next step: defining the payment amounts.

Defining the payment amounts

• Establish the payment amounts for goods or services rendered
• Determine the terms of payment, including any discounts or other reductions in payment
• Specify the currency of payment, if applicable
• Include any tax and shipping costs that are not included in the payment amount, if applicable
• Include any additional fees, such as processing fees, that may be associated with payment

You will know you have completed this step when you have listed all relevant payment amounts and terms in the agreement.

Specifying the payment schedule

• Determine if the vendor will be paid in full up front or in installments
• If payments will be made in installments, decide on the frequency of payments
• Note the date or timeframe of each payment
• Describe how and when the vendor will submit invoices
• Agree on a payment method (i.e. check, electronic fund transfer, etc.)
• Specify the date or timeframe by which payment must be made

You will know you can move on to the next step when the payment schedule is specified in full in the agreement.

Identifying any payment penalties/late fees

• Identify the terms of any late fees or penalties that will be applied to late payments
• Determine the timeline for when late fees will be applied
• Outline the method of calculation for any late fees
• Note any additional fees associated with late payments
• Include a clause that states that the vendor is responsible for informing the customer of any changes in the payment penalty or late fee structure
• Include a clause that requires that the customer be given a minimum of 30 days’ notice before any changes to the payment penalty or late fee structure are put into effect
• Once the payment penalties and late fees have been outlined, reviewed, and agreed upon, the step can be marked as complete.

Defining the accepted payment methods

• Discuss with the vendor what payment methods they accept, such as by credit card, check, or bank transfer.
• Specify in the agreement what payment method or methods you will use.
• Agree on payment terms for the vendor, such as when payment should be made or when payments are due.
• Outline any payment penalties, such as late fees or interest, and when these will apply.
• Include any information regarding the vendor’s payment preferences, such as details about account numbers or payment processing times.
• Once all of the above have been outlined and agreed upon, you can move on to the next step of identifying any applicable warranties or guarantees.

Identifying any applicable warranties or guarantees

• Research any applicable warranties or guarantees that can apply to the agreement.
• Review any current warranties or guarantees the vendor may offer, and determine if they are sufficient for the agreement.
• Identify any additional warranties or guarantees that may need to be included in the agreement.
• Check with the vendor to determine if they can provide any additional warranties or guarantees, or are willing to accept any additional warranties or guarantees provided.
• Once all applicable warranties or guarantees have been identified, discuss with the vendor to ensure they are comfortable with the agreement and all warranties or guarantees.
• Once the vendor agrees to the warranties or guarantees, the step can be marked off the list and the agreement can proceed to the outlining step.

Outlining what warranties or guarantees apply

• List out any warranties or guarantees that the vendor is expected to provide
• Make sure they are specific and detailed to avoid any miscommunication or confusion
• Check if any warranties or guarantees from the vendor are already in place and mention them in the agreement
• When you are done, review the agreement for accuracy and completeness to make sure all warranties or guarantees have been addressed
• Once you are satisfied with the agreement, check off this step to move on to the next.

Specifying who is responsible for resolving any issues

• Identify which parties are responsible for resolving any issues that may arise.
• Determine if any outside assistance is necessary, such as from a third-party mediator.
• Specify the process for resolving any conflicts and make sure it is clearly defined in the agreement.
• Establish deadlines for each party to take action.
• Include a clause stating that all parties must abide by the decision reached.
• When you have specified who is responsible for resolving any issues and included the related clauses, you can move on to the next step: Addressing any potential conflicts of interest.

Addressing any potential conflicts of interest

• Review the agreement to identify any existing or potential conflicts of interest
• Identify the parties involved in the agreement, the type of services being provided, and the time frame of the agreement
• Discuss any conflicts of interest with both parties and come to an agreement that all parties are comfortable with
• List any potential conflicts of interest in the agreement for both parties to review
• Include language in the agreement that specifies how any potential conflicts of interest will be handled in the event they arise
• Once you have addressed any potential conflicts of interest, you can move on to the next step.

Identifying any existing or potential conflicts of interest

• Review any existing documents, such as contracts or business relationships, to identify any potential conflicts of interest
• Check with both parties to determine if either has any relationships with the other that could be seen as conflicting
• Ensure any conflicts of interest are documented in the agreement
• Review any applicable state and federal laws for any conflicts of interest
• Once you have identified any potential conflicts of interest, you can move on to the next step.

Establishing a process for resolving any conflicts

• Research applicable laws in the area of the vendor agreement and any related areas that may be applicable.
• Consult a qualified legal expert to ensure any dispute resolution process is compliant with relevant legal requirements.
• Consider relevant factors such as the cost, complexity, and length of the process to determine an appropriate dispute resolution process.
• Create a clause in the agreement that outlines the dispute resolution process.
• Once the clause is drafted and all parties agree, the step is complete.

Identifying any applicable intellectual property rights

• Determine if any intellectual property rights, such as trademarks, copyrights, or patents, are present in the vendor agreement
• Research any applicable intellectual property rights for the goods or services being provided by the vendor
• Consult an attorney if necessary to ensure that all intellectual property rights are accurately identified and accounted for
• Include a provision in the vendor agreement that clearly states which party owns and is responsible for any applicable intellectual property rights
• Once you have identified and accounted for any applicable intellectual property rights, you can move on to the next step of the guide.

Identifying who has ownership of any created materials

• Establish which party owns any materials created as part of the agreement.
• This could include designs, artwork, text, etc.
• Draft any relevant language in the agreement to clarify ownership.
• Be sure to explain who has the right to use the materials and any restrictions on their use.
• If necessary, consider including licensing terms in the agreement.
• When you have established language that clearly outlines ownership of created materials, you can check this off your list and move on to the next step.

Outlining who has the right to use created materials

• Establish the terms between the vendor and the company in regards to any created materials.
• Include who will be allowed to use the materials and in what capacity.
• Outline any restrictions on the use of the materials, such as time limits and geographical boundaries.
• Specify if any modifications will be allowed by either party.
• Once all of the above points have been addressed, check this item off the list and move on to the next step.

Specifying any limitations of liability

• Determine the extent of any limitations of liability or disclaimers that should be included in the agreement
• Consider including a disclaimer of warranties and limitation of liability
• If the vendor is providing services, consider including a limitation of liability for any damages caused by the vendor
• Include language that states that the vendor is not responsible for any damages caused by third parties
• Once you have determined the appropriate language and included it in the agreement, you can check this step off your list and move on to the next step.

Identifying any limits on liability

• Analyze the scope of the agreement and identify any areas where the vendor may be exposed to liability
• Research any applicable laws or regulations that may limit the vendor’s liability
• Incorporate the limits on liability into the agreement in clear, concise language
• Ensure that the agreement is signed by both parties to make it legally binding
• Once the limits on liability are identified and incorporated into the agreement, you can move on to setting up a process for determining liability.

Setting up a process for determining liability

• Determine the types of liability that could be associated with the vendor agreement
• Decide who will be held responsible for any liabilities or damages that may arise
• Establish a process by which disputes can be resolved, including any applicable timelines
• Outline any limitations on liability, such as any monetary caps or other restrictions
• Include any specific clauses related to liability that both parties must agree to
• Make sure to address any potential indemnification liabilities
• Have both parties sign off on the liability agreement

Once you have completed these steps, you can move on to outlining any dispute resolution processes.

Outlining any dispute resolution processes

• Determine the method of dispute resolution (arbitration, litigation, or mediation)
• Include a detailed description of the dispute resolution process
• Establish a timeline for dispute resolution
• Specify the jurisdiction in which the dispute will be resolved
• Outline the costs associated with dispute resolution
• When complete, ensure both parties have signed and agreed to the terms
• Check this step off your list and move on to the next step of establishing a process for resolving any disputes.

Establishing a process for resolving any disputes

• Ensure that dispute resolution process is included in the agreement
• Outline the process for resolving any disputes, such as arbitration and mediation
• Clearly define the method of dispute resolution in the agreement
• Define the rules and expectations for dispute resolution, such as timelines and costs
• Make sure the agreement includes a clause that all disputes must be resolved in accordance with the agreement
• Make sure all parties agree to the terms of the dispute resolution process
• Once all parties have agreed to the dispute resolution process, you can check this off your list and move on to the next step.

Identifying any dispute resolution methods

• Research dispute resolution methods, such as arbitration or mediation, to determine which one is best for the agreement
• Discuss the dispute resolution methods with the other party to ensure they agree to the same method
• Draft the language of the dispute resolution clause, specifying the method you have agreed upon
• Make sure the language is clear and concise and details the process of dispute resolution
• Once the language is finalized and agreed upon, incorporate it into the agreement
• Upon completion of this step, you can move on to Establishing termination conditions.

Establishing termination conditions

• Decide on a termination period and include it in the agreement
• Choose what kind of termination notice is required
• Decide if an immediate termination is needed in certain circumstances
• Specify any fees that may be due upon termination
• Outline any circumstances that allow for termination with no notice
• Once all the termination conditions have been addressed and added to the agreement, you can move on to the next step.

Outlining when and how the agreement can be terminated

• Outline any conditions that could lead to the agreement being terminated, such as failure to fulfill obligations or breach of contract
• List any notice periods or criteria for the termination of the agreement
• Outline the methods by which the agreement can be terminated, such as in writing or via email
• Make sure to specify how long the agreement will remain in effect should it not be terminated
• Once these conditions are outlined in the agreement, you can move on to the next step.

Specifying any termination fees or penalties

• Decide on the amount of any termination fees or penalties that will be applied if the agreement is terminated
• Determine the conditions that must be met in order for the termination fees or penalties to be applied
• Identify who will pay the termination fees or penalties
• Include the information in the agreement
• Check off this step when you have completed all the above and included the details in the agreement

Finalizing the agreement with signatures

• Ensure that all parties involved have reviewed the agreement and are ready to sign
• Once all parties have signed, make sure to retain copies of the agreement for all parties
• Make sure to review the agreement for accuracy and completeness one final time before signing
• Once all parties have signed the agreement, you have completed this step and can move on to the next step.

Obtaining signatures from all parties involved

• Make sure all parties involved are present
• Provide each party with a copy of the agreement
• Have each party read through the agreement and make sure they understand it
• Have each party sign the agreement
• Have each party date the agreement
• Collect the signed and dated copies of the agreement from all parties
• File the signed and dated copies of the agreement for safekeeping

Once all parties have signed the agreement, you can check this step off your list and move on to the next step.

Specifying the date of signature

• Review the date of the agreement and make sure it is accurate.
• Make sure all parties agree to the date of the agreement.
• Enter the date of the agreement on the contract.
• All parties should sign and date the agreement.
• Check that all signatures and dates are accurate.
• Once confirmed, the agreement is complete.

Verifying the accuracy of all information provided

• Double check all the details provided in the agreement, such as the vendor’s name, address, contact information, and any other information.
• Ensure that all information is correct and up to date.
• Make sure that all legal notices, such as disclaimers or waivers, are included in the agreement.
• Verify that the terms and conditions of the agreement are accurate and legally binding.
• Once all the details have been checked and verified, you can move on to the next step.

FAQ:

Q: Does the agreement need to be written in a particular language?

Asked by John on June 4th, 2022.
A: The agreement should be written in whatever language you are comfortable with, as long as both parties agree to it. However, if the agreement involves parties from multiple countries, then it may be appropriate to have a version of the agreement written in each language. It is important to ensure that all versions of the agreement accurately reflect the original intent and meaning of the agreement. It is also a good idea to include a clause specifying which language will be used in any dispute resolution proceedings.

Q: What are the key elements of a preferred vendor agreement?

Asked by Mary on April 12th, 2022.
A: The key elements of a preferred vendor agreement include an introduction providing an overview of the terms and conditions; an agreement outlining the responsibilities of each party; a section detailing payment terms; and an exit clause outlining what happens if either party terminates the agreement. The agreement should also include clauses outlining intellectual property rights, limited warranties, confidentiality provisions, and dispute resolution procedures.

Q: What legal considerations should be taken into account when writing a preferred vendor agreement?

Asked by David on January 7th, 2022.
A: When writing a preferred vendor agreement, it is important to take into account the laws and regulations of the countries involved. Depending on where you are located, there may be specific laws that need to be considered such as consumer protection laws or antitrust laws. It is also important to consider any other relevant legislation that could affect the contract such as labor laws or environmental regulations. Additionally, you should also ensure that any clauses in the contract comply with local laws and regulations.

Q: What is an example of an exit clause?

Asked by Jessica on November 15th, 2022.
A: An exit clause outlines what happens if either party terminates the preferred vendor agreement before its expiration date. Generally speaking, an exit clause should outline how notice should be given (in writing), how long after notice is given before termination takes effect (typically 30 days), and what happens regarding any unpaid obligations or liabilities. Depending on the nature of the contract, it may also include provisions for non-competition agreements or restrictions against poaching employees.

Q: How does a preferred vendor agreement differ from other types of contracts?

Asked by Jason on August 27th, 2022.
A: A preferred vendor agreement is generally considered to be a more comprehensive type of contract than other types of contracts because it outlines not only payment terms but also details regarding responsibilities and obligations between both parties. Additionally, it often includes clauses related to intellectual property rights, limited warranties, confidentiality provisions, and dispute resolution procedures which are not typically found in other types of contracts.

Q: Is there any difference between UK vs USA vs EU jurisdiction when writing a preferred vendor agreement?

Asked by Amy on February 19th, 2022.
A: Yes, there can be differences between UK vs USA vs EU jurisdiction when writing a preferred vendor agreement depending on where your business is based and who you are contracting with. Generally speaking, each country has its own set of laws and regulations which must be taken into consideration when drafting any type of contract. It is important to research local regulations and consult with an attorney if necessary before entering into any contract so that you can ensure that all parties involved fully understand their rights and responsibilities under the contract.

Q: What other documents might I need when writing a preferred vendor agreement?

Asked by Robert on October 24th, 2022.
A: In addition to the preferred vendor agreement itself, you may need other documents such as non-disclosure agreements if there will be confidential information exchanged between parties; indemnification agreements if either party wishes to protect itself from liability for certain activities; or assignment agreements if one party wishes to transfer its rights or obligations under the contract to another party. Additionally, depending on your industry or sector you may need additional documents such as independent contractor agreements or software licensing agreements as well.

Q: Are there any other important considerations when writing a preferred vendor agreement?

Asked by Susan on July 14th, 2022.
A: Yes - it is important to consider how long the agreement will remain in effect for and how much notice needs to be given if either party wishes to terminate it early; whether either party can assign its rights under the contract; what happens in case of breach; whether either party has exclusive rights over certain goods or services; whether any dispute resolution procedures are necessary; and whether any specific terms or conditions will apply during specific periods such as holidays or vacations. Additionally, it is always wise to have a lawyer review any contracts prior to signing them so that all parties involved fully understand their rights and obligations under the contract.

Example dispute

Possible Lawsuits Involving a Preferred Vendor Agreement

• Breach of Contract: If a party to the agreement is not abiding by the terms of the contract, the other party can sue for breach of contract.
• Unfair Trade Practices: The plaintiff can argue that the vendor is using unfair trade practices, in breach of state or federal regulations.
• Fraud: If the vendor provided false information or engaged in deceptive practices, the plaintiff can argue that it was a fraud.
• Negligence: The plaintiff can claim that the vendor was negligent in performing its duties under the contract.
• Damages: If the plaintiff can prove that the breach of contract or other wrongdoing caused them harm, the plaintiff can seek damages.
• Settlement: If the parties can agree to a settlement to resolve the case, the plaintiff may be able to receive compensation for their losses.

Templates available (free to use)

Preferred Vendor Agreement

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