Contracts and contract drafting are important for a strong foundation for any business relationship. Ensuring contracts are created concisely and that they detail any and all potential concerns is absolutely essential. Vendor contracts, however, create unique legal issues. Knowing the common pitfalls found within vendor contracts is incredibly important.
When it comes to entering into a contract with a vendor or supplier, ensuring the content involved is of direct responsibility to the vendor is key. Here are some of the most common pitfalls of vendor contracts:
Not Doing Your Homework
Ensure the vendor or supplier you are entering into a contract with has been properly vetted. Prior to moving forward with any contract negotiations, preliminary research must be done.
Though many businesses opt for questionnaires in order to confirm vendor work ethic and experience, they can only tell so much, and they leave vendors open to exaggerate or present false information. Businesses should also conduct in-person meetings with the vendor and ask for a list of references, including previous clients. Do online research about the particular vendor and their business to ensure the right decisions are being made.
Not Knowing the Vendor’s Liability
Every vendor agreement should include a limitation of liability provision, which specifies the vendor’s liability under the agreement if breached. Ensure the limitation of liability provision is reviewed and the business will have the option to recover any damages if necessary. A limitation of liability provision should define the amount of damages a business can recover from the vendor for noncompliance.
Forgetting About Regulators
Businesses should have relationships with regulators to calculate the risk of entering into various contracts. Regulators can be valuable assets; and, some directly assess a third-party vendor contract to determine if there is a material risk.
Ensure contractual revisions can be made if an issue arises. Include language within the contract acknowledging that regulators will have the right to review the relationship; and, if an issue arises, the parties will need to resolve it amicably. If the parties are unable to resolve an issue, the business should reserve the right to terminate the relationship without penalty.
Though vendor contracts can be tricky, understanding the pitfalls that could potentially arise – and planning for them appropriately – can help prevent future disagreements or contract breaches.
Houston Attorneys For Vendor Contracts
Contracts help businesses obtain supplies, employ workers, and even purchase or rent the space in which they operate. A well-written contract can protect you and your business from lengthy and expensive litigation down the road. At Feldman & Feldman, our Houston contract attorneys will work to understand your business so we know exactly how to protect you when drafting contracts. If your business needs assistance with the review and drafting of vendor contracts, contact Feldman & Feldman today for a free consultation