Crafting Vendor Contracts

🚨 Founders, there’s a high chance the vendor agreements you’re sending out might be faulty! Yes, you heard that right. I recently reviewed a vendor agreement and found three major mistakes. And trust me, these weren’t tiny, ignorable errors — they were the kind that could lead to real trouble down the line. Here’s what I found: ❌ 𝐍𝐨 𝐈𝐧𝐝𝐞𝐦𝐧𝐢𝐭𝐲 𝐂𝐥𝐚𝐮𝐬𝐞: If the vendor’s work leads to legal issues, your company could face claims of ₹10-20 lakh with no protection. ❌ 𝐀𝐦𝐛𝐢𝐠𝐮𝐨𝐮𝐬 𝐋𝐢𝐚𝐛𝐢𝐥𝐢𝐭𝐲 𝐂𝐚𝐩: Without a clear cap, a vendor mistake could cost you ₹25 lakh or more in damages. ❌ 𝐌𝐢𝐬𝐬𝐢𝐧𝐠 𝐋𝐚𝐭𝐞 𝐃𝐞𝐥𝐢𝐯𝐞𝐫𝐲 𝐏𝐞𝐧𝐚𝐥𝐭𝐲: No timelines mean delayed deliverables — and potential revenue losses of ₹10-15 lakh. So, how can you prevent these mistakes? Ensure your vendor agreement has these 5 nuanced and often-overlooked clauses: ✅ 𝐈𝐧𝐝𝐞𝐦𝐧𝐢𝐭𝐲 𝐟𝐨𝐫 𝐓𝐡𝐢𝐫𝐝-𝐏𝐚𝐫𝐭𝐲 𝐂𝐥𝐚𝐢𝐦𝐬: Protect your business from any legal claims arising from the vendor’s work. ✅ 𝐏𝐞𝐫𝐟𝐨𝐫𝐦𝐚𝐧𝐜𝐞 𝐆𝐮𝐚𝐫𝐚𝐧𝐭𝐞𝐞𝐬: Ensure vendors commit to specific quality standards with financial repercussions if they fall short. ✅ 𝐅𝐨𝐫𝐜𝐞 𝐌𝐚𝐣𝐞𝐮𝐫𝐞 𝐰𝐢𝐭𝐡 𝐃𝐞𝐟𝐢𝐧𝐞𝐝 𝐓𝐢𝐦𝐞𝐥𝐢𝐧𝐞𝐬: Include realistic but strict timelines even in unforeseen circumstances. ✅ 𝐍𝐨𝐧-𝐒𝐨𝐥𝐢𝐜𝐢𝐭𝐚𝐭𝐢𝐨𝐧 𝐂𝐥𝐚𝐮𝐬𝐞: Prevent vendors from poaching your clients or employees. ✅ 𝐀𝐮𝐝𝐢𝐭 𝐑𝐢𝐠𝐡𝐭𝐬: Maintain the right to inspect and verify the vendor’s compliance and performance anytime. Founders, a strong vendor agreement isn’t just paperwork — it’s protection. And if you’re unsure about whether yours covers everything, Dastawezz can help you get it right.

🔍 𝐊𝐞𝐲 𝐂𝐨𝐧𝐭𝐫𝐚𝐜𝐭 𝐂𝐥𝐚𝐮𝐬𝐞𝐬 𝐭𝐨 𝐈𝐧𝐜𝐥𝐮𝐝𝐞 𝐖𝐡𝐞𝐧 𝐎𝐧𝐛𝐨𝐚𝐫𝐝𝐢𝐧𝐠 𝐚 𝐕𝐞𝐧𝐝𝐨𝐫 (𝐅𝐫𝐨𝐦 𝐚 𝐑𝐢𝐬𝐤 & 𝐂𝐨𝐦𝐩𝐥𝐢𝐚𝐧𝐜𝐞 𝐏𝐞𝐫𝐬𝐩𝐞𝐜𝐭𝐢𝐯𝐞) When entering into a contract with a third-party vendor, it’s essential to ensure that the 𝐚𝐠𝐫𝐞𝐞𝐦𝐞𝐧𝐭 𝐢𝐧𝐜𝐥𝐮𝐝𝐞𝐬 𝐚𝐥𝐥 𝐧𝐞𝐜𝐞𝐬𝐬𝐚𝐫𝐲 regulatory and risk management clauses. These not only safeguard the organization but also set clear expectations for both parties. Here’s a quick checklist of critical clauses that should be included and verified in the vendor agreement: ✅ Right to Audit ✅ Intellectual Property Rights ✅ Non-Disclosure Agreement (NDA) ✅ Adherence to Relevant Regulatory Requirements and Industry Standards ✅ Termination Clause ✅ Contract Validity Period ✅ Indemnity Clause ✅ Service Level Agreement (SLA) Monitoring ✅ Defined Point of Contact ✅ Escalation Matrix ✅ Incident Reporting Mechanism ✅ Business Continuity & Disaster Recovery (BCP/DR) Arrangements I’ve also attached a 𝐬𝐚𝐦𝐩𝐥𝐞 𝐒𝐋𝐀 𝐝𝐨𝐜𝐮𝐦𝐞𝐧𝐭 that showcases how these clauses are practically worded and enforced — a great reference point for anyone in procurement, legal, or third-party risk functions. 💬 Let’s keep the conversation going — What additional clauses do you ensure are always included in your vendor contracts?

Negotiations with Sole Vendor : When a vendor is the sole provider of a product or service it typically means that there are no other competing vendors in the market offering the same or similar offerings. This can give the vendor an advantageous position in negotiations as they have less pressure to give competitive pricing or favorable terms. 1. Market Analysis: It is important to thoroughly analyze the market to understand if there are truly no alternative vendors available. Are there any potential substitutes or similar products/services that could meet your needs? This knowledge gives you leverage in negotiations as it establishes your willingness and ability to explore other options if necessary. 2. Supplier Relationship: Building a strong relationship with the vendor is crucial when negotiating with a sole vendor. Developing a good rapport understanding their business objectives and effectively communicating your needs and expectations can help create a cooperative atmosphere. 3. Information Gathering: Collect as much information as possible about the vendor's product pricing structure terms of service and any past negotiations or contracts they have had with other customers. This knowledge will help you better understand their position and identify potential areas for negotiation. 4. Determine Your Leverage: Although a sole vendor typically has an advantageous position you may still have some negotiating leverage. Consider factors such as your value as a customer the potential for long-term business relationships and any unique requirements or specifications that only the vendor can fulfill. Highlighting these points can give you some leverage during negotiations. 5. Explore Alternatives: Even if there are no direct competitors it's still worth exploring similar products or services from different industries or markets. Look for substitutes that may accomplish the same goal or deliver comparable results. This information can strengthen your position and provide alternatives if the negotiation does not go as planned. 6. Negotiating Strategy: Craft a negotiation strategy that considers the unique circumstances of dealing with a sole vendor. Determine your "must-haves" versus your "nice-to-haves" and prioritize them accordingly. Clearly define your objectives and desired outcomes but also be prepared to make concessions where necessary to reach a mutually beneficial agreement. 7. Contract Terms and Conditions: Pay extra attention to the contract terms and conditions. Ensure clarity and transparency in pricing delivery timelines performance metrics warranties support and other crucial aspects relevant to your specific needs. Clearly articulate any desired changes or customization negotiate pricing and payment terms and include provisions for future scalability or modifications.