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Sample Clauses for Vendor Contracts

4 min read
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Contract management is a critical activity in third-party risk management as it can protect your organization from vendor risk. Every organization has its own set of requirements and needs when it comes to their vendor contracts, but fundamental guidelines and sample contract language can help lessen the cumbersome process of drafting and reviewing contracts.

In this blog, lets cover sample language that can be used in your vendor contracts and tips for creating and maintaining a contract clause library.

5 Sample Clauses for Vendor Contracts

Before we dive in, remember, it’s always recommended to consult with legal experts as you draft and manage vendor contracts. These sample clauses aren’t intended to be legal guidance, but instead should be tailored to meet your organization’s unique expectations and needs as well as consider the vendor relationship. Here are 5 sample clauses:

1. Force Majeure:

Neither party shall be liable to the other for failure to perform, or delay in the performance of, any of the Services or obligations in connection therewith under this Agreement when such failure or delay is caused by a Force Majeure Event provided that each party invokes its respective business continuity and/or disaster recovery plan as required hereunder. Upon the occurrence of a Force Majeure Event that materially impacts Vendor’s ability to perform some or all of the Services, Vendor shall, as soon as reasonably possible, give written notice to Client describing the affected area of performance, and the parties shall promptly confer, in good faith, to agree upon equitable, reasonable action to minimize the impact on both parties of such condition.

2. Disaster Recovery/Business Continuity:

Vendor shall at a minimum implement and maintain business continuity, disaster recovery, and backup capabilities and facilities as reasonably necessary to ensure Vendor’s continuing ability to perform the Services and Vendor’s obligations hereunder in the event of a natural or man-made disaster with minimal disruptions or delays.

3. General Compliance:

Each party shall perform all of its obligations under this Agreement in compliance at all times with all foreign, federal, state and local statutes, orders and regulations, including those relating to privacy and data protection.

4. Insurance:

Vendor shall maintain insurance policies in the minimum amounts stated below. During the term of this Agreement, Vendor shall not permit such insurance to be reduced, expired, or canceled without reasonable prior written notice to Client. Upon request, Vendor shall provide a Certificate of Insurance to Client.

In the Insurance clause sample, “minimum amounts stated below” is mentioned. Here are examples of how minimum amounts could look:

  • Commercial General Liability with an aggregate limit of $1,000,000, and $500,000 per occurrence;
  • Worker’s Compensation in accordance with all federal, state and local requirements; with an aggregate limit of $1,000,000 and $500,000 per occurrence;
  • Employer’s Liability with an aggregate limit of $2,000,000 and $1,000,000 per occurrence;
  • Errors and Omissions policy with an aggregate limit of $1,000,000 and $500,000 per claim;
  • Umbrella (Excess) Liability with a limit no less than $5,000,000;
  • Automobile Liability Insurance covering use of all owned, non-owned and hired automobiles for bodily injury, property damage, uninsured and underinsured motorist liability with a minimum combined single limit per accident of $1,000,000 or the minimum limit required by law, whichever limit is greater;
  • Commercial Crime Insurance with a minimum limit of $1,000,000 per loss on an All-Risk form including coverage for property and fund of others in their possession, care, custody, or control; and
  • Cyber insurance in an amount not less than $5,000,000 USD per occurrence.

5. License to Use Trademarks:

Subject to the limitations in this Agreement, Vendor grants Client a revocable, nonexclusive right and license to use Vendor’s trademarks (the “Trademarks”) during the term of this Agreement solely in conjunction with the use of the System and in accordance with Vendor’s trademark usage guidelines. Vendor grants no rights in the Trademarks or in any other trademark, trade name, service mark, business name, or goodwill of Vendor except as licensed hereunder or by separate written agreement of the parties.

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3 Tips for Creating and Maintaining a Vendor Contract Clause Library

Once you have established sample clauses that you tend to use and tweak as needed on a regular basis, it helps to create a vendor contract clause library to reference in the future as it’ll create a more efficient process for everyone. Here are 3 tips:

  • Create sections in your clause library. These can be based on regulatory agencies. For example, clauses grouped by Federal Deposit Insurance Corporation (FDIC), Office of the Comptroller of Currency (OCC), etc.
  • Save approved sample clauses as they’re approved. Within the library, save approved clauses from your redlining process. This will create efficiencies in the future!
  • Stay abreast industry changes and update the library. For example, if a regulatory requirement changes, you’ll want to update the clause within your library.

No two vendor contracts are ever the same, but it’s helpful to have a starting point to work from.

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