Vendor Agreement

E-commerce Industry is a trend in India. It is likely to be worth USD 38 billion by 2016, a 67 percent jump over the USD 23 billion revenues for 2015, as per industry body Assocham. In India, most of the Popular E-commerce Business Models are Marketplace’s which is tie up with the Vendors or Sellers and provide them a platform for the transactions with the customers. To avail this, the sellers have to accept the terms and conditions during the tie-up or onboarding process. So let’s understand about the Vendor or Seller Agreements which is very important for the Ecommerce Startups in India.

Vendor Contracts

Vendor contracts are known for the ongoing transactions on goods or services as against the one-time basis of such an engagement. In the E-Commerce context, it is the exchange of goods and services over the cyberspace.

The Common Elements of Vendor Contracts

Depending upon the type of industry, the following elements are central to the drafting of vendor contracts:

  • Description of Goods and Services: Accurate description of services or goods should be a part of the succinct clause.
  • Pricing: Another pertinent issue is the price at which the goods or services will be provided to the vendee. The prices can be either fixed or variable. There can be times when the different prices will be charged over the course of the contract. The arrangement needs to be reflected vividly in the contract.
  • Delivery Terms: Time is the essence of the contract. Critically speaking, the contract should stipulate the time and frequency terms of the contract.
  • Payment Terms: Regular cash flow emanating from the transactions is the intention of any vendee behind inking the contract. These contracts should also prescribe penalties or interests charged for deferred or delayed payments. Contract education is very significant here. The mode of payment needs to be laid down too.
  • Indemnity clause: The problems concerning damaged or defective goods, inadequacies of delivery, delayed payments should be addressed effectively.
  • Exit/Termination clause- A legal relationship created out of contracts will not be a financially viable throughout its life. A termination manner or an exit option unilaterally or bilaterally should form the basis of any contract according to the requirement. A rigid clause will give a tough time to the parties than a flexible clause.
  • Ownership concept: The whole concept of work product ownership between a  vendor or a vendee needs to be previously decided by way of including an explicit clause.
  • Confidentiality Issues: The obligation to not disclose material information to the third party or non-stakeholders should find a mention.

In this way, it is seen that all the clauses in the contract will have to be carefully drafted and well situated.

This is a guest post by Aishwarya Dhakarey, content team member at MyOnlineCA which makes legal things at your fingertips from Register a Company in India to Legal Documentation.

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