Vendor Agreement Due Diligence Checklist

Use this before signing (or renewing) any vendor agreement that would genuinely hurt your business if the supplier failed to deliver. Not every vendor needs this level of scrutiny — reserve it for the ones that matter.

Commercial Terms

Pricing is fixed for a defined period, with any escalation mechanism spelled out numericallyPayment terms specify a clear due date and interest/penalty for late payment on either sideCurrency and tax treatment (GST, TDS) are explicit

Performance & SLAs

Measurable service-level standards are defined (delivery timelines, defect rates, response times)Consequences for missed SLAs are specified (service credits, right to source elsewhere, termination triggers)A quality-acceptance process exists for goods/deliverables, with a defined rejection window

Termination & Exit

Termination for cause is defined with specific triggering events, not just "material breach"A cure period is specified before termination for cause takes effectTermination for convenience (either party can exit) has a clear notice periodTransition assistance obligations are defined if you need to switch vendors

Risk Allocation

Force majeure lists specific triggering events, not just generic "acts of God" languageForce majeure includes a mitigation duty and a notice deadline (in days)Liability caps are proportionate to the actual value/risk of the contract, not a boilerplate figureIndemnity obligations are mutual where appropriate, not one-sided

Compliance & Data

If the vendor touches customer/employee data, a Data Processing Addendum is in placeConfidentiality obligations survive termination for a defined periodIP ownership of any custom deliverables is explicitly assigned to your business

Dispute Resolution

Governing law and jurisdiction are specifiedA dispute escalation path (negotiation, then mediation/arbitration) is defined before litigation

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Written by RS

20+ years in commercial & corporate practice — in-house at BT, Oracle and Dell before founding AstraLex.