The clauses that matter here are the unglamorous ones: acceptance, what happens when goods are rejected, who bears risk in transit, and how price changes. Disputes with suppliers are almost never about the headline price.
Vendor Agreement
Supply of goods and/or services on a purchase-order basis
The clauses that matter here are the unglamorous ones: acceptance, what happens when goods are rejected, who bears risk in transit, and how price changes. Disputes with suppliers are almost never about the headline price.
This Vendor Agreement (this "Agreement") is made at [PLACE OF EXECUTION] on [DATE] (the "Effective Date").
BY AND BETWEEN
[BUYER NAME], a company incorporated under the Companies Act, 2013 bearing CIN [CIN], GSTIN [GSTIN], having its registered office at [REGISTERED OFFICE ADDRESS] (the "Buyer") of the ONE PART;
AND
[VENDOR NAME], [CONSTITUTION] bearing [CIN / LLPIN / FIRM REGISTRATION] , PAN [PAN] and GSTIN [GSTIN], having its registered office / principal place of business at [ADDRESS] (the "Vendor") of the OTHER PART.
Recitals
A.The Vendor is engaged in the business of supplying [DESCRIBE GOODS AND/OR SERVICES].
B.The Buyer wishes to procure such goods and/or services from time to time by issuing purchase orders.
C.The Parties wish to record the standing terms that will govern every such purchase order.
NOW THEREFORE the Parties agree as follows:
1. Definitions
1.1"Goods" means the goods described in a Purchase Order; "Services" means the services described in a Purchase Order; and "Supplies" means Goods and Services together.
1.2"Purchase Order" or "PO" means a written order issued by the Buyer, in the form of Schedule 3 or through the Buyer’s procurement system, specifying the Supplies required.
1.3"Specifications" means the technical, quality, packaging and performance requirements set out in Schedule 1, the applicable PO, or any drawing, sample or standard referred to in either.
1.4"Delivery Point" means the location specified in the PO for delivery of the Goods or performance of the Services.
1.5"Business Day" means a day other than a Saturday, Sunday or public holiday on which banks are open in [CITY].
2. Framework and purchase orders
2.1This Agreement sets out the terms on which the Vendor will supply, but does not itself commit the Buyer to purchase any quantity or value. The Buyer is under no obligation of exclusivity and may procure the same or similar Supplies from any other source.
2.2Each PO accepted by the Vendor forms a separate contract incorporating this Agreement. The Vendor shall accept or reject a PO in writing within [NUMBER] Business Days; a PO not rejected within that period, or against which the Vendor commences performance, is deemed accepted.
2.3In the event of conflict, this Agreement prevails over the PO except as to quantity, price, Specifications and delivery date, which are governed by the PO. Any printed or standard terms of the Vendor, whether on a quotation, acknowledgement, invoice, delivery note or website, are expressly excluded and have no effect.
9 more pages in the Word file
Preview of the first page. Highlighted fields are the ones you fill in — they appear the same way in Word. Scroll the preview to read on; the full document runs to 10 pages.
These notes accompany the template and explain the drafting choices, the compliance points and the mistakes most often made with this document. They appear as a final page in the Word file, intended to be deleted before the document is executed.
Clause 2.1 makes clear the Buyer commits to nothing until a PO is issued. If you intend a minimum volume or exclusivity, that must be added expressly — and if you do add it, revisit Clause 14.2 so a force majeure event does not leave you in breach of your own minimum.
Clause 2.3 excludes the vendor’s standard terms. This matters: many disputes turn on whose terms attached, and a vendor acknowledgement carrying its own conditions can otherwise displace yours. Keep the clause, and make sure your POs reference this Agreement by date.
Clause 6.6 is the most commercially valuable clause in this document for a buyer. Input tax credit depends on the supplier actually reporting and paying; if the supplier does not, the credit can be denied or reversed with interest, and the loss sits with the buyer unless the contract shifts it. Do not delete it.
Where the vendor is a registered micro or small enterprise, the payment period is capped by Section 15 of the MSMED Act, 2006 and cannot be extended by contract; Section 16 imposes compound interest on delay. There are also adverse income-tax consequences for the buyer on delayed payment to such enterprises. Clause 6.4 exists so you know the vendor’s status — collect the Udyam number at onboarding, not at payment time.
Where vendor personnel work at your premises, principal-employer exposure is real. Clause 7.2 requires monthly evidence of wage and contribution payment before invoices are cleared — enforce it in practice, because that documentation is what protects you if the authorities come to you for the vendor’s arrears. Note the fifty-per-cent wage-base rule and the doubled overtime rate under the Codes; contract labour rate cards built on the old assumptions are usually understated.
Schedule 1 (eight columns) is set in landscape so that HSN codes, units and prices remain readable at full size. Add rows rather than shrinking the font. If your item master runs to dozens of lines, attach it as a separate annexure referenced from Schedule 1 rather than compressing the table.
Clause 9.2 is often overlooked and frequently disputed on exit. If you pay for tooling, mark it, list it in the PO, and inspect it periodically. Recovering unmarked tooling from a vendor in financial distress is difficult.
Clause 4.4 passes title on advance payment and makes the vendor a bailee. This is meaningful protection in an insolvency, but only if the goods are actually segregated and identified. Where advances are large, insist on physical segregation and periodic confirmation.
A vendor agreement is generally stamped as an agreement; some States levy ad valorem duty where a value is stated. Duty is payable in the State of execution and rates vary. Confirm before signing.
Reflects Indian law current as of {{DATE OF USE}}. Verify your State’s position under the Labour Code rules, which are still being notified State by State.
This is a ready-to-use template provided for convenience. Laws and requirements change, and every situation is different — please have it reviewed by a qualified professional (a lawyer, company secretary, or chartered accountant as relevant) before you rely on it.