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Contract Management

6 Items to Negotiate into Your Vendor Contracts

Aug 14, 2019 by Heather Garnett

"You don't get what you deserve; you get what you negotiate." – Dr. Chester L. Karrass

As you enter into a vendor relationship, contract negotiation should always be one of the first tasks completed. It does not matter if it’s during vendor vetting or if you are looking into renewing an existing relationship, it is important to take contract negotiation seriously and write in anything that you can think of that will help with effectively monitoring the vendor throughout the entire relationship.

A lot goes into negotiation. You must have a starting contract to work from, determine who will be involved, discuss who has the authority to sign off or approve requests, etc. With that, what should you negotiate into your vendor contracts?

Top 6 Items to Negotiate Vendor Contracts

The list can be endless and is highly dependent on the relationship at hand. However, here are six of the top items:

1. Service Levels

Include a service level agreement that provides expectations such as the anticipated uptime and performance reporting as well as remedies and penalties that will be taken if these service level expectations aren’t met.

2. Confidentiality Provisions

These are clauses that protect your organization and customers’ sensitive information. You could also include a separate mutual non-disclosure agreement (MNDA) or confidentiality agreement as part of the agreement.

3. Due Diligence Language

Write in language that legally obligates the vendor to provide any due diligence documents that you will expect on a regular basis (e.g., SOC report, BCP/DR report).

4. Duration

The contract term, non-renewal or automatic renewal notice period, etc. should all comply with your organization’s vendor management policy.

5. Data Breach Notification Breach

Third party data breaches are on the rise; there is no denying that. Go ahead and write in a data breach notification clause that requires the vendor to notify you as soon as a breach happens, or within an agreed upon time frame. You need to know sooner rather than later in order to be as proactive as possible regarding next steps and notifying your customers.

6. Exit Strategy

Although it may seem cynical at first, you must determine the exit strategy steps upfront (e.g., how data will be returned or destroyed, notification process). It is business and in business vendor relationships come and go, so be prepared.

Although much more goes into contract negotiations, by implementing these six recommendations now you are already off to a great start. Remember, you want to feel like you and your vendor are partners. By negotiating, you are en route to achieving that.

Learn more about the other critical components involved in contract management. Download the eBook.

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Heather Garnett

Written by Heather Garnett

Heather Garnett is an on-site paralegal with Venminder. Prior to joining Venminder, Heather spent two and half years working in the Middle East as a Legal Secretary for Edinburgh International and as Senior Contract Compliance Manager for a Alastora Private Security Company. During this time she successfully negotiated multi-million dollar contracts with many international companies within the oil and gas industry. Before traveling overseas, Heather worked for private law firms gaining 11 years legal and contractual experience. She received her Paralegal Certification from Murray State University.

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