12 clauses every Indian vendor agreement should have

A vendor agreement sets out what a supplier will do for you and on what terms. When things go well, nobody reads it. When things go wrong, these twelve clauses decide who pays.

1. Parties and authority

Use the full legal names, registered addresses and, for companies, CIN or GSTIN. Make sure the person signing has the authority to sign for each side.

2. Scope of work

Describe exactly what the vendor will deliver, by when, and to what standard. Vague scope is the single biggest cause of vendor disputes. Attach a statement of work if the details are long.

3. Price, payment and GST

State the price, whether it includes GST, the invoice schedule and the payment period (for example, 30 days from a valid invoice). Say what happens if payment is late, and whether TDS will be deducted.

4. Acceptance

Say how you will check the work and how long you have to reject it. Without an acceptance clause, the vendor can argue the work was accepted the day it was delivered.

5. Service levels

For ongoing services, set measurable service levels (response time, uptime) and the credit or penalty if they are missed.

6. Intellectual property

Who owns what the vendor creates for you? If you are paying for it, the agreement should assign it to you, while letting the vendor keep its own pre-existing tools.

7. Confidentiality

The vendor will see your data and business information. Require them to keep it confidential, use it only for the work, and return or delete it at the end.

8. Data protection

If the vendor handles personal data, require security measures, breach notification and compliance with the Digital Personal Data Protection Act, 2023 and its rules as they come into force.

9. Warranties

The vendor should promise that the work will meet the agreed standard, will not infringe anyone else's rights and will follow applicable law.

10. Indemnity and limit of liability

These two clauses decide how much each side can lose. Check that the vendor indemnifies you for its breaches and IP infringement, and that any cap on liability is sensible compared with the contract value. Watch for one-sided caps that protect only the vendor.

11. Term and termination

Set the start date, the length, whether it renews automatically, and how either side can end it: for convenience with notice, or immediately for serious breach. Say what happens on exit, such as handover of work and data.

12. Governing law and disputes

Choose Indian law, a city for courts, and whether disputes go to arbitration first. If you choose arbitration, name the seat, the number of arbitrators and the language.

Before you sign

Read the indemnity, liability and termination clauses twice. They are where one-sided terms hide. If the vendor sent the draft, assume it favours the vendor.

April's contract review marks one-sided and missing clauses in any vendor agreement and gives you the wording to ask for. You can also draft a vendor agreement from a few answers.

This article is general information, not legal advice. For a high-value contract, have a lawyer review it.