The master vendor agreement is a business contract signed between a retailer of goods and the retail supplier. This contract outlines their ongoing relationship. The contract template used is often dictated by the retailer. The business model of big retailers is to serve as the aggregator of many smaller retail suppliers to make sure quality , in demand goods are on the store shelves for their retail customers. The master vendor agreement gives retail buyers and suppliers alike a framework inside which they can conduct business transactions. This framework serves to protect the parties from typical known problems that arise regularly but flexible enough to allow for changing circumstances from transaction to transaction.
The master vendor agreement works in conjunction with the retail purchase order. Transaction details that change such as product SKU, product description, deliver by dates, product quantities and agreed upon product pricing are all set out in the retail purchase order. For the terms of the transaction that do not change the retail purchase order refers back to the master vendor agreement.
In theory, the spirit of the master vendor agreement is to protect both parties and clearly outline each party’s responsibilities. In practice, the master vendor agreement weighs heavily in favor of the bigger stronger party to the transaction (usually the product retailer). It attempts to protect the retailer from all the common problems that arise with suppliers. It also spells out for the supplier exactly what they have to do to complete transactions successfully and get paid.
Common items outlined in the master vendor agreement include:
- The parties involved in the transactions
- Address for notices
- Required insurance coverages
- Invoice payment terms
- What rights to offset the retailer has
- How to properly submit an invoice
- Details as to what parts of the vendor agreement may be assigned if any
- Product returns rights and responsibilities
- When the retailer accepts title to the goods
- Standard shipping requirements
As you can see a master vendor agreement is a very good tool for the retailer to ensure and control the timeliness and quality of the goods they offer retail customers. As it relates to the factoring transaction, the master vendor agreement must be read and understood by the factor. If a factoring customer does not live up to the terms of the vendor agreement chances are good the factoring company will not receive payment for invoices it has purchased.
