What Challenges Can Vendor Contracts Present and How to Cope With Them Easily?
Vendor agreement contracts and vendor contract management is a challenging task for all businesses that require these legal agreements in order to operate.
If a business hopes to effectively manage these various contracts and not become overwhelmed, it is crucial to use vendor contract management software.
What Are Vendor Contracts?
A vendor contract is a legal agreement between a contractor and vendor – it outlines the legally binding agreements relating to the work or services that are being done from one party to the other.
Vendor contracts are very important in order to ensure that both parties perform the tasks or sell the products they are being paid to do. Without written and signed agreements, these deals between vendor and contractor would not be protected and this could result in loss of money, time, products, etc.
These vendor agreement contracts can be involved in a wide array of areas, such as consulting, marketing, supply of goods, licensing, etc. (We will take a look at the three main categories of vendor agreement contracts in this article).
Vendor contract management (VCM) and negotiating contracts with vendors is an inherently difficult process. Managing contracts for every business can be troublesome without an effective and efficient system set in place that benefits employees and all parties involved in the contract process.
In this article, we will go over the three main categories of vendor agreement contracts, which are included in a vendor contract, vendor contract management best practices, and the benefits of management software.
Vendor Agreement Contract: Three Main Categories
There are three main categories of vendor agreement contracts.
The categories of vendor agreement contracts include:
Purchase of Goods
The most popular type of vendor contract agreement involves the purchase of goods.
This simply means one party is purchasing goods from another party – the terms and clauses within the contract may have varying levels of complexity depending on the industry, the value of the goods, involved parties, etc.
Purchase of Services
Another popular vendor agreement contract involves the purchase of services.
It is very important to always have a contract written when services are purchased because it legally binds the service provider to perform their services in the future – otherwise, they could have legal ramifications.
If the service provider fails to deliver on their side of the contract, the vendor has legal documentation that this was a failure of vendor contract compliance.
Purchase of services contracts can be complex depending on the industry, type of services, amount of services purchased, importance of services, etc.
License of Rights
The third and final category of vendor agreement contracts is the license of rights.
In this licensing agreement, one party grants the other party the right to sell and produce goods involving patented technology, brand names, trademarks, or similar.
Without the written license of rights vendor agreement contract, the ‘licensor’ party could sue the other party for damages after down the line – a written and signed license of rights ensures that the exact obligations of each party remain held and that vendor contract compliance is maintained.
What Is Included in a Vendor Contract?
Vendor agreement contracts can be complex and contain many different provisions and clauses – it all depends on the specific parties involved, the industry, type of vendor contract, size of businesses, importance of contract, etc.
That said, there are certain parts of vendor contracts that are relatively constant and found in most vendor/contractor agreements.
Some of these include:
- Customer name(s)
- Vendor name(s)
- Obligations of each party
- Details/description of product(s)/service(s)/license
- Payment terms
Vendor Contract Management: Best Practices & Challenges
Negotiating contracts with vendors and vendor contract management (VCM) are difficult processes.
Best practices of vendor contract management involve:
- Setting a clear planning process (it’s crucial to define what you need and how you go about finding the supplier that can help you with your problem, as well as the compliance requirements and specifications that are important to you and your business).
- Get everything in writing (it is very important to get every term, agreement, and obligation down in legal documentation – otherwise, both involved parties run the risk of resulting in error, wasted times, legal fees, etc.).
- Manage your contracts effectively (dealing with an overflow of vendor agreement contracts can be troublesome, yet it is essential to do so in order to operate successfully).
Managing vendor agreement contracts can be made easy with the use of vendor contract management software.
Benefits of Vendor Agreement Management Software
The main benefits of vendor contract management software include:
- Improved compliance
- Automated contract lifecycle
- Enhanced contract visibility
- Reduced manual labor
- Streamlined vendor agreement phases
- Fast approval
- Renewal date/expiry notifications
- Automated reports
- Easier management
Vendor contract management software makes the entire vendor contract agreement process easier for all parties involved and is highly recommended for any business that spends time on vendor contract management in daily operations.