What Is a Vendor Contract?

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  • Written By: K. Kinsella
  • Edited By: Allegra J. Lingo
  • Last Modified Date: 25 February 2020
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A vendor contract is a contract agreement between an individual or business and a service provider. The contract includes the terms of service, the cost involved, and the details of how long the vendor will provide the requested service. A vendor usually includes a provision that allows either party to cancel the contract if certain conditions are met.

Businesses usually agree to a vendor contract with firms that provide services such as cleaning, window washing, and security. Prior to agreeing to a contract, most businesses ask several vendors to submit bids. The bids detail the kind of services that the vendors intend to provide as well as specific information related to the costs involved. Some vendors offer low cost bids that involve minimal labor and reduced services, while other companies offer a broader range of services at a higher cost. Business owners review the details of each bid and can reject a bid, accept a bid, or enter into further negotiations in order to lower the price before a contract is agreed upon.

Consumers normally agree to vendor contracts in the same manner as businesses. Vendor contracts with individuals are often more complicated than business contracts because vendors have to cater to the individual's specific needs. Businesses that provide services at weddings and other occasions have to base the bid on the specifics of the event in question, and this can lead to extensive price negotiations.


Both the party paying for the service and the party providing the service must sign a vendor contract in order for it to take effect. The contract should contain the date that the agreement was the signed, the date the contract takes effect, and the date that the contract term will end. Vendor contracts typically last for at least one year, although some companies prefer to operate on a month-to-month basis to ensure that the vendor will provide the services as agreed.

A service provider can nullify a vendor contract if the party receiving services fails to pay for the services in compliance with the terms of the contract. The party paying for the service normally has the right to terminate the contract if the vendor fails to provide services as agreed or delivers service in a manner that violates the terms of the original agreement. Disputes related to vendor contracts are usually resolved in small claims courts.


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