If you run a business, chances are you require suppliers—whether for goods, services, or both. Have you ever paused to think about the question: do we have a proper contract in place with them? If the answer is no, or if you are relying on email chains or verbal agreements, you are taking a big risk. If the answer is yes, have you properly reviewed the contract or taken legal advice on it – if not, again you are likely to be taking a risk.

Why are supplier contracts important?

Supplier contracts are essential because they clearly set out the expectations, responsibilities, and rights of both parties. They help prevent misunderstandings and disputes, and if something does go wrong, a well-drafted contract will give you a much stronger legal position. There are key provisions you will want to ensure are place such as term, termination rights and payment terms.

Having a clear contract in place isn’t just about protecting your business—it’s also about setting up a professional, efficient working relationship from the outset.

Case study: When a verbal agreement went wrong

A local events company, Amaze Me Ltd, relied on a long-standing supplier for providing staging equipment. For years, the arrangement was based on informal email confirmations and a “gentleman’s agreement” as to price, payment terms, delivery etc. Nothing was ever placed into a formal contract.

One year, just days before a major music festival that Amaze Me were responsible for organising, the supplier cancelled the provision of equipment, claiming a scheduling mix-up. Amaze Me had no written contract to fall back on, no agreed cancellation terms, no liability terms and no clear remedy. They were forced to scramble for an alternative at double the cost, and their client relationship suffered.

Had there been a written contract in place, Amaze Me could have enforced delivery, recovered losses, or at the very least, planned contingencies in advance.

Key clauses every supplier contract should include

Here are some of the most important clauses you should look for or include when entering into a supplier agreement:

Description of goods or services

Be specific. What exactly is being supplied? Avoid vague wording—spell out quantities, standards, and any applicable specifications or quality requirements.

Price and payment terms

Include the agreed price, when payments are due, how invoices should be submitted, and any late payment consequences. If VAT applies, state it clearly.

Delivery and timescales

Set out how and when the goods or services will be delivered, and what happens if there are delays. Will there be penalties? Is time “of the essence”?

Term and termination

How long will the contract last? Can it be renewed? What are the grounds for termination, and how much notice must be given?

Liability and indemnity

Limit your liability where appropriate and make sure the supplier takes responsibility for any losses caused by their products or services. Consider whether indemnities are needed for specific risks.

Intellectual property

If the supplier creates materials or products for you (such as designs, software or content), make sure the contract clearly states who owns the IP.

Confidentiality

If you’re sharing sensitive information with your supplier, make sure there’s a confidentiality clause that prevents them from disclosing it.

Dispute resolution

It’s wise to agree in advance how disputes will be handled. Will you try mediation first? Which courts will have jurisdiction?

Force majeure

This clause protects both parties if something outside your control (like a natural disaster or pandemic) prevents one of you from fulfilling the contract.

Final thoughts

Investing a little time (and legal input) into your supplier contracts can save you a lot of stress and money later down the line. Don’t rely on generic templates or handshake deals. A well-drafted agreement tailored to your specific needs helps ensure your business relationships are built on solid ground. Likewise, if a supplier does give you a contract or terms of business, don’t be afraid to take legal advice on it and push back on any terms that are unfavourable to your business. Most contracts can be negotiated upon.

If you’d like help reviewing or drafting supplier contracts, feel free to get in touch. It’s a small step that can make a big difference. Contact Sarah Naylor on 01302 320621 or at sarah.naylor@switalskis.com