Free Checklist
Supplier agreement checklist
12 clauses procurement teams should check in every supplier or vendor contract. Practical, to the point and written for people who aren't lawyers.
01
Payment terms and conditions
Are the payment terms acceptable? 30 days net is standard. Watch for early payment discount clauses that erode your margin.
Suppliers sometimes bury settlement discounts that pressure you into paying early. Read the small print.
02
Pricing and price variation
Is pricing fixed or variable? If variable, what triggers a price change? Look for clauses that allow unilateral price increases.
A vague "prices may be adjusted annually" clause gives them a blank cheque. Tie increases to a benchmark like CPI.
03
Delivery and performance
What are the delivery timelines? What happens if they miss them? Make sure there are consequences for late delivery.
No liquidated damages for late delivery means the supplier has no financial incentive to hit deadlines.
04
Quality and acceptance criteria
How is quality defined and measured? What's the acceptance process? You need the right to reject substandard work.
If acceptance is deemed automatic after a set period, you might be stuck with defective goods by default.
05
Limitation of liability
Is their liability capped? Is the cap proportionate to what they're supplying? Suppliers often try to cap liability at the contract value or less.
A liability cap of "fees paid in the last 12 months" on a critical supply contract is nowhere near enough.
06
Indemnification
Who carries the risk if something goes wrong? Make sure the supplier indemnifies you for their negligence and IP infringement.
One-sided indemnities that only protect the supplier are common. Push for mutual or at least balanced indemnification.
07
Insurance requirements
Does the supplier need to carry insurance? Professional indemnity, public liability and employer's liability are standard asks.
Ask for certificates of insurance, not just promises. And check the cover levels match the contract risk.
08
Termination for convenience
Can you terminate without cause? What's the notice period? Being locked in with no exit is a procurement nightmare.
If only the supplier has termination for convenience, you've got an imbalanced contract. Both sides should have exit rights.
09
Subcontracting
Can they subcontract without telling you? If you chose this supplier for their expertise, you don't want them handing the work to someone else.
Require written consent before subcontracting. The supplier should remain liable for subcontractor performance.
10
Confidentiality and data
How do they handle your confidential information and data? Make sure obligations survive the end of the contract.
Confidentiality that expires when the contract ends is worthless. Survival periods of 3-5 years are standard.
11
Business continuity
What's their plan if something goes wrong on their end? Do they have a disaster recovery plan? What's the impact on your supply chain?
Ask to see the actual plan, not just a statement that one exists. Test it during the relationship, not after a crisis.
12
Step-in rights
Can you step in and take over if they fail to deliver? This is important for critical suppliers where you can't afford disruption.
Without step-in rights, your only option when a critical supplier fails is termination. That's often worse than the problem.
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