What do FOB terms mean and which should I choose?

FOB (Free On Board) terms specify where the risk of loss and title transfer from seller to buyer during transit. FOB Origin means the buyer bears the risk once the goods leave the vendor's dock — if goods are lost or damaged in transit, it is the buyer's problem and the buyer's insurance claim. FOB Destination means the vendor bears the risk until the goods arrive at the buyer's location. For domestic transactions where the vendor is shipping to you, FOB Destination is generally more favorable to the buyer. For international transactions, Incoterms (such as CIF or DAP) are more commonly used.

Should I include an exclusivity provision?

Exclusivity provisions can be mutual (you buy exclusively from this vendor; the vendor sells exclusively to you) or one-sided. Before agreeing to buy exclusively from one vendor, consider whether this would leave you vulnerable to supply disruptions. Before granting exclusivity to a vendor (limiting their ability to sell to your competitors), make sure you are providing enough volume to justify the restriction and that the provision has a reasonable geographic and product scope. Broad exclusivity agreements may draw antitrust scrutiny if they foreclose competition in a significant market.

What happens if the vendor delivers defective goods?

Under UCC Article 2, the buyer has the right to inspect goods upon delivery and to reject non-conforming goods. The vendor agreement should specify the inspection period (e.g., 10 business days) and the rejection process. If goods are rejected, the vendor typically has the right to 'cure' — to replace the defective goods or repair the defect. The agreement should also address the vendor's warranty period and the buyer's remedies (replacement, refund, or price reduction) for warranty claims arising after acceptance.

What is a force majeure clause and why does it matter?

A force majeure clause excuses a party from liability for delays or failures caused by events beyond its reasonable control — such as natural disasters, wars, government actions, pandemics, or major supply chain disruptions. The COVID-19 pandemic highlighted the importance of well-drafted force majeure provisions. The clause should specify: (1) what events qualify as force majeure; (2) what obligations the affected party has to notify the other party; (3) how long a force majeure event can last before either party may terminate; and (4) whether the affected party must make reasonable efforts to mitigate the impact.

Should I require my vendor to carry insurance?

Yes — for vendors supplying goods that could cause injury or property damage, or services performed at your location, you should require the vendor to maintain appropriate insurance coverage (commercial general liability, product liability, workers' compensation, and errors & omissions for service providers). You should require the vendor to name your company as an additional insured on its liability policies and to provide certificates of insurance before work begins. This template does not include an insurance provision; if insurance requirements are important to your transaction, add a specific insurance clause or consult an attorney.

Free Vendor Agreement Template — Fill Out & Download Instantly

Free — No Sign-Up RequiredPDF & WordUpdated April 9, 2026

⚠️ Legal Disclaimer: This template is attorney-reviewed and built to US legal standards. It does not substitute for professional legal advice. For complex situations, we recommend consulting a licensed attorney.

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Governing state for this agreement

Governing State*

The state whose laws will govern this agreement

The buying company entering into this agreement

Company Name (Buyer)*

Company Address*

The vendor or supplier providing goods or services

Vendor / Supplier Name*

Vendor Address*

Vendor Tax ID (EIN or SSN)

Required for IRS Form 1099 reporting if vendor payments exceed $600/year

Products/services, pricing, and purchase order process

Products / Services to Be Supplied*

Describe the goods or services in as much detail as possible, including specifications, SKUs, or service descriptions

Pricing Structure*

Purchase Order Process*

Shipping, risk of loss, and delivery obligations

Delivery Terms*

Delivery terms determine who bears the risk of loss and pays shipping costs during transit

Invoice payment timing and late payment provisions

Payment Terms*

Quality standards, inspection rights, and vendor warranties

Quality Standards*

Inspection and Rejection Rights*

Vendor Warranties*

Confidentiality and exclusivity

Include confidentiality / non-disclosure obligations

Include exclusivity provisions

Agreement duration, renewal, and termination rights

Agreement Term*

Termination for Cause*

Force Majeure*

Indemnification*

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VENDOR AGREEMENT

This Vendor Agreement ("Agreement") is entered into as of the date last signed below, by and between:

COMPANY (Buyer):

[Company Name (Buyer)]

[Company Address]

VENDOR:

[Vendor / Supplier Name]

[Vendor Address]

Governing Law: [Governing State]

1. SCOPE OF SUPPLY

1.1 Products / Services. Vendor agrees to supply the following goods and/or services (the "Goods/Services") to Company:

[Products / Services to Be Supplied]

1.2 Pricing. The pricing for such Goods/Services shall be as follows:

[Pricing Structure]

1.3 Purchase Orders. [Purchase Order Process]

2. DELIVERY TERMS

3. PAYMENT TERMS

4. QUALITY STANDARDS AND ACCEPTANCE

4.1 Quality Standards. [Quality Standards]

4.2 Inspection and Rejection. [Inspection and Rejection Rights]

4.3 Vendor Warranties. [Vendor Warranties]

5. VENDOR WARRANTIES AND REPRESENTATIONS

Vendor represents and warrants that: (a) Vendor has the legal authority to enter into this Agreement; (b) the Goods/Services will conform to all applicable specifications, purchase orders, and industry standards; (c) the Goods/Services will not infringe any third-party intellectual property rights; and (d) Vendor will comply with all applicable laws and regulations in the performance of its obligations.

8. TERM AND TERMINATION

8.1 Term. [Agreement Term]

8.2 Termination for Cause. [Termination for Cause]

8.3 Effect of Termination. Upon termination, all outstanding purchase orders accepted prior to the termination notice shall be fulfilled unless waived in writing. Each party shall promptly return or destroy the other party's Confidential Information.

9. FORCE MAJEURE

[Force Majeure]

10. INDEMNIFICATION

[Indemnification]

11. GENERAL PROVISIONS

11.1 Governing Law. This Agreement is governed by the laws of the State of [Governing State].

11.2 Dispute Resolution. Any dispute arising under this Agreement shall first be submitted to good-faith negotiation. If unresolved within 30 days, the parties agree to submit to binding arbitration under the AAA Commercial Arbitration Rules.

11.3 Entire Agreement. This Agreement, together with all purchase orders issued hereunder, constitutes the entire agreement of the parties and supersedes all prior discussions.

11.4 Amendment. Amendments require written agreement signed by authorized representatives of both parties.

11.5 No Waiver. Failure to enforce any provision shall not constitute a waiver of that provision.

IN WITNESS WHEREOF, the parties have executed this Vendor Agreement as of the date last written below.

COMPANY:

_________________________________________

Authorized Signatory, [Company Name (Buyer)]

Name: ___________________________________

Title: ____________________________________

Date: ____________________________________

VENDOR:

_________________________________________

Authorized Signatory, [Vendor / Supplier Name]

Name: ___________________________________

Title: ____________________________________

Date: ____________________________________

Document Completeness0%

Governing state for this agreement

Governing State*

The state whose laws will govern this agreement

The buying company entering into this agreement

Company Name (Buyer)*

Company Address*

The vendor or supplier providing goods or services

Vendor / Supplier Name*

Vendor Address*

Vendor Tax ID (EIN or SSN)

Required for IRS Form 1099 reporting if vendor payments exceed $600/year

Products/services, pricing, and purchase order process

Products / Services to Be Supplied*

Describe the goods or services in as much detail as possible, including specifications, SKUs, or service descriptions

Pricing Structure*

Purchase Order Process*

Shipping, risk of loss, and delivery obligations

Delivery Terms*

Delivery terms determine who bears the risk of loss and pays shipping costs during transit

Invoice payment timing and late payment provisions

Payment Terms*

Quality standards, inspection rights, and vendor warranties

Quality Standards*

Inspection and Rejection Rights*

Vendor Warranties*

Confidentiality and exclusivity

Include confidentiality / non-disclosure obligations

Include exclusivity provisions

Agreement duration, renewal, and termination rights

Agreement Term*

Termination for Cause*

Force Majeure*

Indemnification*

What Is a Vendor Agreement?

A vendor agreement is a legal contract between a company (the buyer) and a vendor or supplier that governs the ongoing supply of goods or services. It establishes the terms under which the vendor will provide products or services, including pricing, delivery, quality standards, payment terms, and remedies for breach. Unlike a one-time purchase order, a vendor agreement creates a framework for a continuing business relationship and typically covers multiple transactions over a defined period.

When Do You Need It?

Use a vendor agreement when your company is entering into an ongoing relationship with a supplier for goods, raw materials, components, or services. This agreement is appropriate for situations such as contracting with a manufacturer to supply products on a regular basis, engaging a service provider for recurring IT, marketing, or maintenance services, or establishing preferred vendor status with a supplier who will receive regular purchase orders. A vendor agreement is particularly important when significant sums of money are involved, when product quality is critical to your business, or when you need exclusivity or confidentiality protections..

What's Included in This Template

Company and vendor identification and contact information
Description of products or services being supplied
Pricing structure and purchase order process
Delivery terms (FOB origin, FOB destination, or CIF)
Payment terms (Net-15, Net-30, or Net-60)
Quality standards and acceptance criteria
Inspection and rejection rights
Vendor warranties on products/services
Confidentiality provisions (optional)
Exclusivity provisions (optional)
Agreement term and renewal terms
Termination for cause provisions
Force majeure clause
Indemnification and limitation of liability

How to Fill It Out

Identify the Parties — Enter the full legal name, address, and — for the vendor — the tax ID (EIN or SSN) of both the company and the vendor. These details are important for invoicing and tax reporting purposes.

Define Products or Services and Pricing — Describe the products or services to be supplied and the pricing structure. Pricing may be fixed, volume-based, or subject to periodic adjustment. Include your purchase order process — how orders are placed and acknowledged.

Set Delivery and Payment Terms — Select the delivery terms (FOB Origin, FOB Destination, or CIF) which determine when risk of loss transfers from the vendor to the company. Set payment terms specifying how long the company has to pay invoices after receipt (Net-15, Net-30, or Net-60).

Set Quality and Warranty Standards — Describe your quality standards and the vendor's warranties on the products or services. Include your right to inspect and reject non-conforming goods and the procedure for handling rejections.

Configure Optional and Advanced Provisions — Enable confidentiality if the vendor will have access to proprietary information. Enable exclusivity if you want the vendor to supply exclusively to your company, or vice versa. Set the agreement term, renewal process, and termination rights.

Legal Requirements & Notes

This vendor agreement is drafted under general commercial contract principles and the Uniform Commercial Code (UCC) Article 2 (for goods) and Article 2A where applicable. Key considerations:

UCC Article 2: Governs the sale of goods in all 50 states. UCC warranty rules (§§ 2-313 to 2-316) apply to goods transactions. Express warranties can be created by descriptions, samples, or specifications in purchase orders. Implied warranties of merchantability and fitness can be disclaimed with conspicuous language.

FOB Terms: FOB (Free On Board) terms under UCC § 2-319 and Incoterms 2020 determine when risk of loss and title pass from seller to buyer during transit. FOB Origin favors the seller; FOB Destination favors the buyer. Verify that your shipping insurance is appropriate for the chosen delivery term.

Payment Terms and Late Fees: Late payment interest provisions should be checked against your state's usury laws. Some states cap commercial interest rates; others exempt B2B transactions from usury limits entirely.

Confidentiality: If the vendor will have access to trade secrets, customer data, or regulated information (HIPAA, CCPA), consider a separate, more detailed NDA or data processing agreement.

Exclusivity: Exclusivity provisions may have antitrust implications under the Sherman Antitrust Act (15 U.S.C. § 1) and state analogues if they substantially foreclose competition in a relevant market. Consult legal counsel for exclusive dealing arrangements of significant commercial scope.

Frequently Asked Questions

A vendor agreement is a master contract that establishes the framework for an ongoing supply relationship — it sets the general terms for all future transactions including pricing structure, quality standards, payment terms, and legal provisions. A purchase order is a transaction-specific document that specifies the particular goods or services ordered, quantities, unit prices, and delivery instructions for a specific order. Purchase orders are typically issued under the master vendor agreement and incorporate its terms by reference. Having a vendor agreement prevents disputes about which party's boilerplate terms govern each transaction.

Free Vendor Agreement Template — Fill Out & Download Instantly

VENDOR AGREEMENT

VENDOR:

1. SCOPE OF SUPPLY

2. DELIVERY TERMS

3. PAYMENT TERMS

4. QUALITY STANDARDS AND ACCEPTANCE

5. VENDOR WARRANTIES AND REPRESENTATIONS

8. TERM AND TERMINATION

9. FORCE MAJEURE

10. INDEMNIFICATION

11. GENERAL PROVISIONS

COMPANY:

VENDOR:

What Is a Vendor Agreement?

When Do You Need It?

What's Included in This Template

How to Fill It Out

Legal Requirements & Notes

Frequently Asked Questions

Related Templates

Service Agreement

Non-Disclosure Agreement (NDA)

Partnership Agreement