While dozens of contract provisions provide you with legal and cost protections, three specific terms are vital for the success of your operations department. Read below for an overview of how these three provisions influence your relationships with vendors and your ability to deliver your own products or services.
This section of your vendor contract describes what work your vendor will and will not do for you. It should be specific enough to cover the quantity and quality of the products or services (or both) that you are purchasing. If you are purchasing a product or software that has multiple versions, ensure that your scope of work accurately lists the version you want and whether updates are included under your purchase price. If you are purchasing services, identify milestones and their associated deadlines, as well as whether you are contracting for any revisions or alterations after the initial delivery has been made.
A confidentiality or non-disclosure clause is a mechanism for keeping your business’s intellectual property secret and confidential. Your vendors — particularly those that perform on-site, or are involved in your data collection, software systems, and the like — have access to your proprietary information. This information often takes the form of your unique business ideas, strategies, customer lists, processes, trainings, plans, and archived data. It can also be the personal information you have on file for both your customers and your employees.
A confidentiality provision will legally bind and require your vendors to treat this information as securely as they would treat their own. A critical factor in writing this provision is to both comprehensively and specifically define what constitutes proprietary and confidential information. Lock in additional protections by adding an indemnity clause wherein your vendor holds you harmless for any breach made on their part.
The purpose behind this provision is to shift risk from you onto your vendor, especially for their acts for which you may be held liable by sheer proximity. The more risk you take on, the higher your potential costs in the event that a third-party is harmed by your vendor’s inadequate product or deliverable. Indemnity provisions can help you mitigate your risks against a limited set of scenarios, or any and all circumstances. This language can protect you alone, or both you and your vendor.
A sophisticated vendor will want to negotiate this provision with you. That is when you call your corporate counsel and authorize them to have a conversation with your operations department to best understand the kinds of risks you can and cannot tolerate. Then, counsel will customize the indemnity negotiations to reflect the risks you are and are not willing to accept in relation to your vendor.
In each of these three vital provisions, general and broad statements can wreak havoc if a dispute between you and your vendor arises. Both the exercise of creating and finalizing a well-tailored contract will clarify expectations between you and your vendor setting you up to succeed in your business and customer relationships.
We at Garcia & Gurney are happy to assess your specific needs and craft appropriate contracts for your business. Please call us at 925-468-0400 or contact our firm online.
Disclaimer: The contents of this article should not be construed as legal advice. This article is not an exhaustive list of issues that may arise in contracting with vendors. Businesses should seek the assistance of an attorney who will analyze multiple factors unique to each kind and size of business.