Key Goals for Contract Negotiation with Vendors and Suppliers

» Articles » Accounting Articles » Article

August 12, 2013

When negotiating on behalf of an entity purchasing services or goods from a vendor or supplier, you have the opportunity to use the process to achieve a number of benefits. First, you should achieve clarity with respect to the performance required from the vendor. This minimizes the likelihood of disputes over ambiguities and lessens the potential for opportunistic behavior.

Second, you should ensure an appropriate allocation of commercial risk. There is risk inherent in every contractual relationship, but it is important to ensure that the risk is commensurate with the potential benefit the customer will derive.

Third, you should ensure appropriate remedies in the event of the vendor’s breach. Vendor failures do occur, and this is something for which you should plan. Fourth, you should protect and retain appropriate intellectual property rights in connection with the relationship. This will protect the customer from being hamstrung in its business, as well as from unfair competitive disadvantage.

Fifth, you should use the contract to establish a framework for managing the vendor’s performance. Carefully negotiated contract provisions can provide effective project management tools for the customer.

Continue reading below

FREE Accounting Training from Lorman

Lorman has over 37 years of professional training experience.
Join us for a special report and level up your Accounting knowledge!

Tax Aspects of Operating a Partnership-Taxed Organization
Presented by Langdon T. Owen Jr.

Learn More

Finally, you should create tools for minimizing the impact of disputes. In the unfortunate event that a dispute arises, carefully considered contractual provisions can minimize the disruptive impact of such a dispute.

The material appearing in this web site is for informational purposes only and is not legal advice. Transmission of this information is not intended to create, and receipt does not constitute, an attorney-client relationship. The information provided herein is intended only as general information which may or may not reflect the most current developments. Although these materials may be prepared by professionals, they should not be used as a substitute for professional services. If legal or other professional advice is required, the services of a professional should be sought.

The opinions or viewpoints expressed herein do not necessarily reflect those of Lorman Education Services. All materials and content were prepared by persons and/or entities other than Lorman Education Services, and said other persons and/or entities are solely responsible for their content.

Any links to other web sites are not intended to be referrals or endorsements of these sites. The links provided are maintained by the respective organizations, and they are solely responsible for the content of their own sites.