Whether you are buying raw material, hiring an agency or outsourcing IT, a vendor agreement decides who carries the risk when something goes wrong. Many businesses sign the vendor's standard form without reading it. These are the ten clauses we check first when drafting or reviewing a vendor agreement in India.

In short (Hinglish): Vendor agreement mein kaam ka scope, payment, delivery, warranty, liability ki limit, termination aur dispute ka tareeka saaf likha hona chahiye. Agreement par sahi stamp duty bhi zaroori hai.

1. Scope of work and specifications

Describe exactly what will be supplied or done: quantities, quality standards, specifications and deliverables. Vague scope is the most common cause of disputes. Attach a detailed schedule if needed.

2. Price and payment terms

State the price, taxes, invoicing schedule, payment due date and interest on late payment. If the supplier is registered as a micro or small enterprise, the MSMED Act, 2006 generally requires payment within the agreed period, and in any case within 45 days of acceptance, failing which interest becomes payable.

3. Delivery, acceptance and delay

Set delivery timelines, the inspection and acceptance process, and the consequences of delay, such as liquidated damages or the right to buy from another source.

4. Service levels

For service contracts, define measurable service levels (response time, uptime, turnaround) and what happens when they are missed, such as service credits.

5. Warranties

The vendor should warrant that goods or services meet the agreed specifications, comply with law and do not infringe anyone's intellectual property, and should fix or replace defective work within a set period.

6. Intellectual property

If the vendor creates anything for you, such as designs, software or content, the agreement should say who owns it. Without a written assignment, ownership may stay with the vendor.

7. Confidentiality and data protection

Protect your business information and any customer or employee personal data the vendor handles. Where personal data is involved, the vendor should follow your instructions and the Digital Personal Data Protection Act, 2023.

8. Indemnity and limitation of liability

An indemnity makes the vendor compensate you for specific losses, for example third-party claims caused by its negligence or IP infringement. A limitation of liability caps how much either side can claim. Read these two clauses together: a broad cap can quietly cancel a strong indemnity.

9. Term and termination

Set the contract period, renewal, and the right to terminate for breach (with a cure period) and for convenience (with notice). Cover what happens on exit: handover of work, return of data and final payments.

10. Dispute resolution and governing law

Choose how disputes will be resolved: negotiation first, then mediation or arbitration under the Arbitration and Conciliation Act, 1996, with a clear seat (for example, Varanasi), or the courts of a named city. State that Indian law governs the contract.

Don't forget stamp duty

Agreements must be stamped as required under the applicable stamp law. An unstamped or under-stamped agreement may not be admitted as evidence until the deficit duty and penalty are paid, which can delay recovery when you need it most.

The LexSphere drafts and reviews vendor agreements, NDAs, franchise and service agreements for businesses in Varanasi and across India. See our contract drafting services or request a consultation.

This article is general information, not legal advice. The right clauses depend on your industry and the value of the contract.