Vendor Agreement Format: Key Points to Include

Introduction – Vendor agreement format

In the day-to-day course of business, especially as operations scale, companies begin relying on multiple third-party service providers, whether it’s for raw materials, IT support, logistics, marketing, or digital infrastructure. A proper vendor agreement is essential, as while verbal understandings or informal purchase orders may work during the early stages, they rarely offer protection if the vendor underdelivers or a payment dispute arises.

A well-drafted vendor contract in India acts as a legal safeguard, a performance benchmark, and a mutual reference point between the business and the vendor. But, in reality, a large number of vendor relationships still operate without a formal agreement, relying solely on trust or loosely worded emails. This exposes the business to potential legal and financial risks.

Some of the most common issues that arise in undocumented vendor relationships include:

• No clarity on exact deliverables or timelines.
• Disputes over payment terms or late delivery.
• Confusion over who owns the intellectual property created.
• Vendor sharing confidential business data with third parties.
• Termination without notice or continuation of subpar service.

The purpose of this guide is to help Indian businesses, whether small startups or larger companies, understand how to approach the vendor agreement format properly. It walks through the structure, common clauses, execution steps, and the differences between relying on a vendor agreement template and drafting vendor agreements for businesses with context-specific protections.

When Should You Use a Vendor Agreement?

Many businesses, especially in their early stages, operate without formal vendor agreements. While this may seem cost-effective or efficient in the short term, the lack of written terms often leads to disputes, missed deliverables, or legal exposure. Understanding when a vendor contract becomes necessary is crucial for legal risk management. The following categories outline situations where a proper vendor agreement format is necessary and advisable.

Regular Supply/Service Vendors

Where a business relies on a third party to provide ongoing goods or services, such as raw material suppliers, packaging vendors, cleaning staff, or equipment maintenance contractors, a formal agreement must be executed.

• These relationships are long-term and recurring
• Payment cycles are monthly or milestone-based
• Deliverables often involve quantity, quality, and time-sensitive performance

Using a clear vendor agreement format ensures that the expectations on both sides are recorded and enforceable.

One-Time Project Vendors

It is important to set the terms in writing in order to ensure the smooth compliance on the part of vendors.

• Examples: Website developer for company launch, branding agency, office interior vendor. These projects are limited in duration but involve significant budgets or custom deliverables. Any absence of documentation can lead to delayed completion or scope creep.

In such cases, the use of a vendor agreement template may not be sufficient. It is better to prepare a customised contract with project-specific deliverables.

Outsourced Service Providers

Outsourcing functions like accounting, HR, customer service, or IT support comes with access to sensitive company information. A vendor contract in India should always be executed when such internal functions are being managed externally.

Key risks to cover:

• Data confidentiality breaches
• Service disruption
• IP misappropriation
• Non-compliance with labour laws (if the vendor provides manpower)

Vendor agreements here often require more elaborate clauses, including SLAs and penalties.

Digital and Cloud-Based Vendors

In today’s business landscape, companies rely heavily on SaaS tools, cloud hosting, third-party APIs, and licensed platforms. Google Workspace, Zoho, AWS, Slack, and CRM tools fall under this category. Many of these vendors have their standard online contracts, but Indian businesses must still evaluate them carefully.

Where possible, businesses should execute a custom vendor agreement (or at least add-on terms) to protect their data, ensure uptime, and clarify liability in the event of breach.

Table: When to Use a Vendor Agreement

Vendor Type	Examples	Is Agreement Required?	Notes
Recurring vendors	Stationery, logistics, maintenance	Yes	Include timelines and the scope of work clearly
One-time project vendors	Branding, website, furniture	Yes	Add clauses on confidentiality, IP, and SLAs
Outsourced service providers	Accounting, IT, recruitment	Definitely	Reviewthe standard ToS, negotiate where possible
Cloud/SaaS vendors	CRM, cloud hosting, email tools	Often (if negotiable)	Review standard ToS, negotiate where possible

Legal Structure of a Vendor Agreement Format

While every business engagement is different, most vendor contracts follow a reasonably consistent legal structure. The format ensures that both commercial and legal aspects are captured, enforceable, and reviewable. Whether you’re using a vendor agreement template or preparing one from scratch, the following sections should always be present.

Heading and Parties

Every vendor contract in India must begin with a clear title and identification of the parties.

Example:

“This Vendor Agreement is made and entered into on this [Date] by and between [Company Name], a company incorporated under the Companies Act, 2013 having its registered office at [Address] (hereinafter referred to as the ‘Company’) and [Vendor Name], a [Entity Type] with its registered office at [Address] (hereinafter referred to as the ‘Vendor’).”

Ensure that:

• Legal names match PAN/Aadhaar or incorporation documents.
• The entity type (proprietor, LLP, Pvt Ltd) is mentioned.
• Communication address and authorised signatory details are correct.

If the vendor is a sole proprietor or freelancer, clarify their legal capacity.

Effective Date and Term

This clause defines when the agreement begins and how long it will be valid.

For example:

“This Agreement shall come into force on [Effective Date] and shall remain in effect for a period of [X months/years], unless terminated earlier by the provisions of this Agreement.”

Why it matters:

• Payment obligations often depend on when the agreement is deemed to start
• Helps in calculating breach, notice period, and renewal timelines
• For fixed-scope vendors, this also ties in with milestones and delivery dates

Recitals (Optional but Useful)

Recitals are introductory statements that explain the purpose and context of the agreement. These are not legally binding clauses, but are useful in interpretation.

Example:

“WHEREAS, the Company is engaged in [describe business]; and WHEREAS, the Vendor represents that it has expertise in providing [services/goods], the parties hereby agree to the following terms.”

Recitals help establish:

• Background of the relationship
• Commercial intention
• Mutual understanding (in case of dispute later)

Some legal teams prefer to skip recitals, but they can be useful, especially when agreements are reviewed after years.

Interpretation and Definitions Clause

This is a critical but often overlooked part of the vendor agreement format. It reduces ambiguity.

Purpose:

• Clarifies meanings of recurring terms like “Services”, “Force Majeure”, “Deliverables”, and “Business Day”.
• Helps during enforcement if any term is challenged.
• Avoids the risk of undefined jargon leading to misinterpretation.

Structure:

• A “Definitions” clause should come at the beginning, before operative clauses.
• Use capitalised terms consistently throughout the contract.
• Avoid legalese, and ensure definitions are easy to understand for both parties.

Sample definitions:

• “Services” shall mean the scope of work described in Annexure I.
• “Effective Date” shall mean the date on which this Agreement is signed by both parties.
• “Confidential Information” shall have the meaning assigned in Clause [X].

Key Clauses to Include in Vendor Agreements

Every vendor contract in India must address the core commercial relationship clearly, i.e., what is to be delivered, how, when, and under what conditions. The legal enforceability of the vendor agreement depends largely on how these operative provisions are written. Whether you are preparing the agreement from scratch or relying on a vendor agreement template, the following key clauses in vendor agreement drafting should always be present and tailored to your specific arrangement.

Scope of Work (SOW)

This clause defines the nature of goods or services the vendor is expected to provide.

What it should cover:

• Description of services or products.
• Process or methodology (if applicable).
• Personnel deployment (if resources are supplied).
• Dependencies or client-side obligations.
• Duration of engagement.

Even if a detailed annexure is attached, the agreement body should carry a brief mention of the SOW and refer to the annexure.

Example:
“The Vendor shall provide digital marketing services as more particularly described under Annexure A (Scope of Work), which shall form an integral part of this Agreement.”

Why this clause matters:

• Helps assess breach if delivery is incomplete.
• Avoids disputes regarding scope creep.
• Enables performance evaluation for renewals.

Deliverables and Timelines

Tightly linked to the SOW, this clause lists what outputs are expected and by when.

Must specify:

• Deliverable formats (e.g., reports, prototypes, creative files).
• Milestone deadlines.
• Dependencies or preconditions.
• Delivery method (physical/email/cloud folder).
• Revision windows (if applicable).

Timelines may be fixed (calendar-based) or event-based (e.g., “within 7 days of client feedback”). Avoid vague language like “as soon as possible.” Instead, state that, “All deliverables under Phase I shall be submitted within 21 (twenty-one) calendar days from Effective Date.”

Timely delivery is a key enforcement hook in any vendor agreement format.

Commercial Terms and Payment Schedule

This clause lays out the monetary terms of the arrangement.

Common inclusions:

• Total contract value.
• Break-up of fees (setup vs ongoing vs variable).
• Payment schedule (e.g., advance, milestone-based, monthly retainer).
• Currency of payment.
• Late payment charges (if applicable).

Link payment to deliverables. For example, “Second tranche of ₹1,00,000 shall be payable within 7 (seven) days of delivery and approval of Phase II Deliverables.”

Invoicing, Tax, and Deductions

It is often clubbed with the commercial terms and payment schedule, but is important enough to stand alone.

It should specify:

• Billing cycle (monthly/quarterly/after deliverables).
• Format and content of invoices.
• Taxes applicable (GST, TDS, cess).
• Whether the client will deduct TDS and issue Form 16A.
• Payment mode and bank details.

Failure to clarify tax treatment leads to future disputes and may expose the business to tax non-compliance.

Sample clause:
“The Vendor shall raise a tax invoice on the 1st day of each calendar month. The Company shall deduct TDS as per applicable law and remit the balance by the 10th of such month.”

Confidentiality and IP Ownership

This clause protects proprietary business information and creative outputs.

It includes:

• Definition of “Confidential Information”.
• Duration of confidentiality obligations (often survives termination).
• Permitted disclosures (e.g., to accountants or lawyers).
• Return or deletion of materials on request.
• Ownership of deliverables (client-owned or vendor-retained?).

Example wording:

• “All Deliverables created during engagement shall be the exclusive property of the Company.”

Tip: Always include this, even for short-term vendors. This clause is often omitted in a boilerplate vendor agreement template, and leads to long-term IP confusion.

Warranties and Representations

In this section, the vendor confirms they have:

• Legal capacity to enter into the contract.
• Necessary skills, licenses, or certifications.
• Not used any third-party IP without permission.
• Delivered services in a professional, timely, and competent manner.

This clause is essential for drafting vendor agreements for businesses dealing with regulated industries (finance, legal, health).

If the vendor provides software, we can add a clause such as, “Vendor warrants that the software is free of malicious code and does not infringe third-party IP.”

Termination Rights and Notice

This clause clarifies how and when the agreement can be ended by either side. It must include:

• Duration of agreement
• Termination for convenience (optional, but common)
• Termination for breach or insolvency
• Notice period (e.g., 15/30 days)
• Exit obligations (handover, payment, return of materials)

Sample clause:
“Either party may terminate this Agreement for convenience by providing 30 (thirty) days’ written notice.”

Avoid indefinite agreements unless termination is well defined.

Indemnity and Liability

Outlines financial responsibility for damages caused by the vendor’s breach or misconduct. It should state:

• Vendor shall indemnify the client for third-party claims arising from IP violation, data breach, or defective services.
• Cap on liability (e.g., “limited to fees paid in last 3 months”).
• Exclusion of indirect or consequential damages.

This is one of the most negotiated key clauses in vendor agreement matters.

Note: Avoid one-sided indemnities unless justified by contract value or regulatory reasons.

Governing Law and Jurisdiction

It specifies which legal system applies and where disputes will be heard.

Sample clause:

“This Agreement shall be governed by and construed under the laws of India. Courts at New Delhi shall have exclusive jurisdiction.”

If multiple office locations exist, choose a neutral forum or HQ jurisdiction.

Dispute Resolution

Many larger vendor contracts include an arbitration clause.

Typical language used in this clause:

“All disputes shall be finally resolved by arbitration under the Arbitration and Conciliation Act, 1996, by a sole arbitrator appointed mutually by the Parties. Seat of arbitration shall be Mumbai.”

This helps avoid prolonged litigation and is enforceable even for foreign vendors operating in India.

Table: Summary of Key Clauses in Vendor Agreements

Clause	Purpose	Common Mistakes to Avoid
Scope of Work (SOW)	Defines what vendor will deliver	Vague language or missing annexure
Deliverables & Timelines	Fixes deadlines and output format	“As soon as possible” or unclear handover
Commercial Terms	Clarifies billing, GST, and TDS treatment	Missing linkage to milestones
Invoicing and Tax	Clarifies billing, GST, TDS treatment	Wrong PAN/GST, late invoice cycles
Confidentiality & IP	Protects business data and deliverables	No clause or vendor retains ownership
Warranties	Vendor assures capability and legality	Absent in many templates
Termination	Allows early exit, sets notice	Indefinite terms with no exit clause
Indemnity & Liability	Financial protection against loss	No cap or one-sided liability
Governing Law & Jurisdiction	Legal enforceability and forum	No mention or vague reference to “India”
Dispute Resolution	Avoids court litigation	Arbitration seat not defined

Supporting Documents and Annexures

While the main body of the vendor contract in India defines the commercial and legal framework, annexures play a critical role in fleshing out the details. Many operational disputes arise due to the ambiguous or missing annexures to the contract.

When drafting vendor agreements for businesses, legal teams should ensure that all supporting documents are properly attached and cross-referenced in the contract. This is especially important when the agreement follows a standard vendor agreement template, as annexures help tailor the engagement to the specific facts.

Below are the most commonly used annexures:

Sample Scope of Work (Annexure I)

This annexure must define the deliverables in detail. Avoid simply pasting generic scope lines. Instead, include:

• List of services or goods to be provided.
• Expected quality standards (e.g., ISO compliance, turnaround time).
• Resources allocated (team members, software licenses).
• Tools used or platforms accessed.
• Detailed phases (if multi-stage).

Even if the main agreement refers to “as described in Annexure I,” the annexure itself should be dated and signed to prevent future disputes.

Example structure:

Phase	Deliverable Description	Timeline	Output Format
I	Website Wireframes	10 working days	PDF + editable files
II	Full UI Design	15 working days	Figma access
III	Deployment Support	5 working days	Zoom walkthrough

This is essential to a strong vendor agreement format.

Service Level Agreement (SLA)

Applicable where performance is measurable, such as tech support, logistics, or managed services.

SLA should include:

• Uptime guarantees (e.g., 99.5% availability).
• Response and resolution time commitments.
• Downtime penalties or credits.
• Escalation matrix.

Without a signed SLA annexure, enforcement becomes difficult even if SLA terms are referenced in the key clauses in the vendor agreement.

Rate Cards and Commercial Tables

Attach a rate sheet where the agreement involves variable pricing or on-demand services.

The rate card must specify:

• Per unit cost (hour, lead, seat, project milestone).
• Bulk discounts (if any).
• GST and other charges.
• Payment trigger for each item.

This avoids ambiguity when invoices are raised and can be used to reject inflated claims.

Brand Guidelines or Asset Lists

In cases where vendors work on branding, advertising, content, or software that uses client assets, attach relevant reference material.

This may include:

• Fonts, colours, and logo usage rules.
• Do’s and don’ts for UI/UX design.
• FTP credentials or drive links.
• Software licensing rights or client-owned templates.

Attach as “Annexure III – Brand Guidelines” and make it a binding document under the vendor agreement format.

Stamp Duty and Execution Formalities

Many vendor contracts are rendered unenforceable in court due to poor execution practices or insufficient stamping. While it’s common for businesses to rely on digital PDFs or email confirmations, it’s still important to follow execution rules as prescribed under Indian law.

Stamp Paper Value under Indian Laws

Under the Indian Stamp Act, 1899, and relevant State Stamp Acts, every agreement executed in India must be stamped.

• A standard vendor agreement format usually requires a non-judicial stamp paper of ₹100 or ₹200.
• For contracts involving higher transaction values (e.g., over ₹10 lakh), some States require stamping proportional to contract value.
• In Maharashtra, the stamp duty on service contracts is 0.1% of the contract value, subject to a maximum cap.
• If not stamped at execution, the document may be admissible in court only after penalty payment.

Recommendation: Always consult your local stamp duty schedule. The safest approach is to use ₹100/₹500 stamp paper for contracts below ₹5 lakh, unless otherwise specified by counsel.

Physical vs. Electronic Execution

In today’s digital landscape, many vendor contracts in India are executed via digital signatures or email acceptance. However, not all forms are legally equivalent.

Execution Method	Legally Valid?	Notes
Wet signature	Yes	Preferred for high-value contracts or regulatory filings
Digitally signed	Yes (under IT Act)	DSC or Aadhaar-based eSign acceptable; avoid scanned signatures
Email acceptance	Sometimes	May not hold in court unless acceptance is clear, unconditional

Tip: If both parties are in agreement but cannot meet physically, use an eSign platform (like ZoopSign, Leegality, or Digio) that tracks authentication and timestamps.

Number of Copies and Signatories

Best practice is to execute at least two copies of the vendor agreement, one for each party.

• Each copy should be signed by authorised signatories.
• If the vendor is an individual or proprietor, obtain Aadhaar/PAN details on file.
• If the vendor is a company, attach board resolution (if required) and use common seal (if applicable).
• For LLPs, use the Designated Partner’s signature and stamp.

Avoid unsigned annexures; initial each page and annexure separately.

Notarisation or Witnessing (If Applicable)

Though it is not mandatory under Indian contract law for vendor contracts, notarisation helps strengthen enforceability in court.

When to notarize:

• If the vendor is unregistered or based in a different State.
• If the agreement value exceeds ₹10 lakh.
• If the parties want extra validation for future dispute resolution.

Witness signatures may be added if the parties agree, but are not legally compulsory unless specified by another statute.

Vendor Agreement vs Purchase Order

The difference between a formal vendor agreement and a routine purchase order is often overlooked in day-to-day business, particularly when the engagement feels simple or routine. But overlooking this distinction can result in serious gaps in protection, especially when disagreements arise over payment, quality, or timelines. This section tries to untangle that distinction and explains when a purchase order might work, and when a proper vendor contract in India is non-negotiable.

Nature and Purpose

A purchase order (PO) is fundamentally a transactional document, issued to confirm quantity, price, and delivery. It is primarily operational. On the other hand, a well-drafted vendor agreement format outlines the entire legal framework within which such transactions occur. Think of it as the rulebook: the PO is a move within the game, but the vendor agreement sets the rules of the game.

Most established businesses don’t rely on just one of these; they use both. The vendor agreement is signed once to record the commercial terms, legal obligations, and liability protection, while POs are raised repeatedly under that umbrella.

Where a PO Might Suffice

There are limited situations where a standalone PO can be adequate, such as:

• When the order is for standard, off-the-shelf goods with no customisation.
• When the transaction is low in value or non-recurring.
• When prior engagement terms have already been recorded in a master vendor agreement.
• When the transaction involves no IP creation or confidential exchange.

Still, even in these cases, the PO should reference the prevailing vendor agreement template India clause set, or standard terms if available on your website.

Using Both: Ideal Structure

In mid-size and large organisations, both documents are used consistently. Here’s how:

• A vendor agreement lays out the general terms: fees, taxes, delivery obligations, confidentiality, and dispute resolution.
• Individual POs are raised for each specific order, referencing the agreement, setting out order value, quantity, and shipping timelines.

This dual structure helps the legal and procurement teams keep governance clean, every order is covered, but repetitive clauses don’t need re-negotiation each time.

Example:

• A warehouse maintenance vendor signs a 1-year vendor contract in India in April.
• The company issues monthly POs detailing items like “20 safety helmets”, “replacement lighting strips,” etc.

Without the underlying contract, every new PO would have to manually list dispute clauses, liability limits, and IP provisions, which is cumbersome and prone to errors.

Weaknesses of Informal Confirmations

Relying solely on email threads or WhatsApp messages creates complications. If something goes wrong, proving mutual consent becomes difficult, especially in front of a judicial forum.

For instance:

• A vendor claims they agreed to a price of ₹3.2 lakhs per deliverable. You reply that your PO was only for ₹2 lakhs and there’s no contract to fall back on.

In such cases, the absence of a signed vendor agreement format creates ambiguity. Courts generally look for intention, consideration, and clarity, none of which may be properly captured in chat screenshots or casual emails.

Practical Takeaway

Don’t assume POs offer you legal protection unless they sit within a properly signed vendor agreement. When drafting vendor agreements for businesses, ensure that all orders refer back to the main contract. This avoids legal loopholes that unscrupulous vendors might exploit later.

Common Mistakes to Avoid in Vendor Contracts

Even where vendor contracts exist, several recurring errors compromise their enforceability. These mistakes are particularly common in startups or fast-growing companies that borrow templates from other industries or skip legal review in the rush to close a deal.

Let’s look at a few real-world problem areas that can be avoided with better vendor contract planning.

1. Scope of Work Is Too Vague

A recurring mistake in vendor contracts in India templates is listing the service in just one line: “Vendor shall provide marketing services.” But what exactly does that mean? Does it include performance ads? Creative writing? Community building? Does it require feedback cycles?

When the agreement lacks deliverable-level detail, several issues emerge:

• Vendor insists task was completed, even if it wasn’t useful.
• Client refuses payment, claiming incomplete work.
• There’s no benchmark for assessing delay or defect.

Solution: Attach a detailed deliverables table in Annexure I, listing scope, quantity, format, and due date.

Example:

Task	Quantity	Format	Timeline
Product Blog Articles	10 per month	Google Docs	7th of every month
Social Media Creatives	12 per month	PSD + PNG	Every Monday

This one document can prevent dozens of phone calls and disputes.

2. Payment Triggers Are Missing or Unclear

Another common mistake is writing: “Client shall pay ₹2,00,000 for services rendered.” But when? It’s important to identify if it will be upfront or monthly or after delivery, or upon the sign-off.

Without a stated trigger, vendors may chase payment right after signing, while clients may defer it until final results. Neither position is unreasonable, and that’s what makes it problematic.

Solution:

• State payment triggers clearly: “50% advance upon signing, balance 50% upon submission of first monthly report”.
• Mention payment window: “within 10 working days of invoice”.
• Link payments to deliverables, not time passed.

This structure protects both parties and is essential while drafting vendor agreements for businesses handling retainer-based service providers.

3. Absence of IP and Confidentiality Clauses

IP ownership clauses are crucial, especially in creative, tech, and marketing industries; skipping them can be fatal.

Example problems:

• Vendor reuses your logo mock-up for another client.
• They claim ownership of the code they wrote for your backend.
• They disclose your pitch deck while trying to win new work.

These situations arise when the vendor agreement template India version used doesn’t address IP creation and assignment.

Fix:

• Add a simple clause: “All work product, upon full payment, shall be the sole and exclusive property of the Client.”
• Include a confidentiality clause with a survival period post-termination (e.g., 2 years).

Without these terms, courts may rule that the vendor retains rights, even if you paid for the output.

4. No Cap on Liability

In small businesses, liability is often not discussed. But one mistake, say a data breach caused by the vendor, can cause massive loss. Without a liability cap, the vendor may become hostile or evasive.

Reasonable fix:

• “Vendor’s liability shall not exceed the total fees paid in the 2 (two) months preceding such claim.”
• Also mention: “Neither party shall be liable for indirect or consequential damages.”

This provides both sides with reasonable certainty, protecting relationships while containing exposure.

Conclusion – Vendor agreement format

For any business, especially SMEs and startups in India, vendor agreements form the legal spine of commercial relationships. Whether the vendor is supplying software, logistics support, marketing services, or even periodic maintenance, a clear and legally enforceable contract is essential. Businesses often make the mistake of working off generic templates, or worse, informal emails. But as the stakes grow, even for a single engagement, having a structured, well-drafted vendor contract in India is no longer optional. It’s a minimum safeguard.

Why Customised Agreements Work Better Than Templates

It’s tempting to download a ready-made vendor agreement template from the internet and simply update the names. But legal liability rarely works on copy-paste logic.

Reasons to avoid generic templates:

• They lack industry-specific key clauses in vendor agreements like IP, indemnity, warranties, or governing law.
• They do not factor in actual commercial terms, e.g., phased payments, GST, service taxes.
• Many clauses may be invalid in India or outdated with respect to the legal position.
• Jurisdictional confusion, many templates are designed for foreign jurisdictions.

Instead, working with a customised vendor agreement format ensures the contract fits your business, state laws, and specific commercial model. It also helps anticipate future risks and fix them at the drafting stage.

Encourage Legal Vetting of All Commercial Vendor Contracts

Even if an in-house legal counsel is unavailable, businesses should consider an external review of any high-value or long-term vendor engagement. Lawyers help spot issues that business teams may miss:

• Hidden indemnity risks.
• Weak dispute resolution mechanisms.
• IP leakage risks in creative or development contracts.
• Absence of termination protection or refund clauses.

It may cost a little upfront, but poor contract terms often lead to litigation, loss of IP, or reputational damage later. For businesses drafting vendor agreements for the first time, a one-time legal vetting creates a base template that can be reused with minor adjustments.

Summary of Key Takeaways of Vendor agreement format

• A vendor contract in India should never be reduced to an email exchange or verbal trust; use a proper agreement.
• Include specific key clauses in the vendor agreement, payment, IP, indemnity, liability cap, and confidentiality.
• Stamp and sign the agreement properly, digital or physical.
• Don’t rely only on a vendor agreement template in India; customise it as per your work, state, and vendor type.
• Use POs only under a signed agreement, not as substitutes.
• Always ensure proper execution, dates, signatures, annexures, and witnesses (if applicable).

FAQs – Vendor agreement format

1. Can a vendor agreement be signed electronically in India?

Yes. Under the Information Technology Act, 2000, agreements can be executed digitally using Aadhaar eSign or Class 2/Class 3 Digital Signature Certificates. For the agreement to be enforceable, the signatures must be verifiable and ideally done via platforms that record timestamps and user authentication. Scanned signatures sent by email may not always be legally valid in court.

2. Is stamp duty mandatory for vendor contracts?

Yes. As per the Indian Stamp Act, 1899, (and relevant State Stamp Acts), contracts must be adequately stamped to be admissible as evidence in a court of law. While stamp duty may be nominal (₹100 or ₹200), if not paid, it can delay enforcement during litigation. Stamp paper should be purchased in the name of one of the parties, preferably before or on the date of execution.

3. What is the difference between vendor and supplier agreements?

A supplier agreement typically refers to the procurement of goods, often in a recurring or bulk nature. A vendor agreement has a broader scope; it covers services (like software, consultancy, creative work) in addition to goods. While both can overlap, in vendor contracts, terms are more frequently used for service providers or external consultants.

4. Can a vendor agreement be terminated early?

Yes. Most agreements include a termination clause. A party may terminate for cause (e.g., breach, insolvency) or for convenience (with prior notice). However, notice period and exit obligations should be defined clearly in the contract. If no such clause exists, the Indian Contract Act allows termination upon breach, subject to damages.

5. Should freelancers also sign vendor contracts?

Absolutely. Freelancers, especially in content, design, tech, and marketing, often handle confidential materials and create intellectual property. A vendor agreement with freelancers helps:

• Define ownership of deliverables
• Set payment terms and timelines
• Maintain confidentiality of shared materials
• Prevent the reuse of creative work elsewhere

This ensures clarity and professional accountability on both sides.

6. What is a vendor SLA?

A Service Level Agreement (SLA) is an annexure or clause in the vendor agreement that sets service benchmarks. Common metrics include:

• Response time
• Resolution time
• Uptime (for tech services)
• Quality measures (for creative/consulting work)

If vendors miss SLA targets, there may be consequences, like penalty deductions or reduced fees. Including a vendor SLA is strongly advised in tech-heavy or outcome-sensitive relationships.

7. Is an NDA enough, or do I need a full vendor agreement?

An NDA (Non-Disclosure Agreement) only protects confidentiality. It does not address payment, delivery timelines, dispute resolution, IP ownership, or termination. For even basic engagements, you need a full vendor agreement that includes legal and commercial terms. Use an NDA as an add-on, not a substitute, especially when there are multiple deliverables, phases, or monetary obligations involved.

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