When entering into any vendor relationship, the contract you sign is far more than a formality — it’s your first and best line of defence. While many agreements look professional on the surface, they can be riddled with vague clauses, imbalanced obligations, and hidden liabilities that come back to haunt you. For SMEs in particular, a single flawed vendor agreement can disrupt operations, trigger disputes, or expose the business to financial loss.
Here’s how to spot the red flags before they become real problems.
1. One-Sided Termination Clauses
A common pitfall is a termination clause that heavily favours the vendor. If your supplier can walk away with minimal notice, but you’re locked into lengthy commitments or penalties, you’re at a clear disadvantage. Flexibility must be mutual. If the exit route only works one way, ask why — and have it amended.
2. Vague Deliverables and Undefined KPIs
If the contract doesn’t clearly outline what’s being delivered, when, and to what standard, you’ll struggle to enforce anything later on. Avoid agreements with loosely defined scopes, timelines, or performance expectations. These are often the contracts that lead to frustration, delays, and eventual legal disputes.
3. No Clear Dispute Resolution Mechanism
A good vendor agreement anticipates the worst while hoping for the best. If your contract lacks a practical dispute resolution process — or if the jurisdiction favours the vendor’s home country — you may find yourself in a lengthy, expensive battle should things go wrong. International vendors especially must be held to enforceable, neutral standards.
4. Auto-Renewal Without Notification
Auto-renewal clauses can be harmless when managed — or a financial trap when forgotten. Some contracts auto-renew for a year or more without giving proper notice windows or alerts. This is often overlooked until it’s too late. Always check the renewal terms and ensure there’s a process for timely reminders.
5. Ambiguity Around Liability and Indemnity
Look closely at how risk is distributed in the contract. Does the vendor take responsibility for delays, defects, or damages? Or have they placed the burden entirely on you? Clauses that limit their liability — or require you to indemnify them regardless of fault — are major red flags.
6. Unverified or Unvetted Vendors
Even the strongest contract can’t fix what due diligence should have caught. If a vendor seems evasive about ownership, financials, or previous client experience, that’s cause for concern. Many businesses rush to sign for price or speed — only to discover later they’ve partnered with a shell entity or non-compliant operator.
Contracts Should Build Confidence, Not Risk
An agreement should be a tool of clarity and trust. When red flags go unnoticed, they often signal future pain: missed deliverables, costly legal action, broken partnerships, or exposure to regulatory consequences. A 10-minute review is never enough. In today’s business climate, precision matters — especially when your vendors are global and your exposure crosses borders.
At VendSafe, we specialise in removing uncertainty from commercial relationships. Whether you need vendor vetting, custom contract drafting, or outsourced due diligence, we give you the clarity and control to scale safely. Our team ensures every agreement you sign is balanced, enforceable, and aligned with your operational risk appetite — so you never have to second-guess a signature.
