Commercial contracts · Template

Vendor and supplier agreement template for India

A vendor agreement decides what happens on the bad day: goods arrive late, quality slips, an invoice goes unpaid. In India it also decides something most templates miss entirely — whether the supplier's MSME status, and the statutory payment protection that comes with it, is on the record at all.

Quick Statutory Answer

What is the maximum payment period for an MSME supplier in India? Under s. 15 of the MSMED Act, 2006, payment is due on the date agreed in writing, and where no date is agreed, within 45 days from the day of acceptance or deemed acceptance. The section operates as a ceiling on what can be agreed, so a longer contractual term does not lawfully extend it.

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Vendor / Supplier Agreement format

The full text of this document as VidhiSar drafts it, with every blank shown in square brackets. Copy it or download it as a Word file and fill it in yourself — or answer a few questions and VidhiSar fills it in and prints a formatted PDF. Clauses that apply only in some cases are left out here; the drafting flow adds them when your answers call for them.

PARTIES

This Vendor/Supplier Agreement ("Agreement") is executed on [Effective Date] between:

Buyer: [Buyer Legal Entity Name], a legal entity registered in India, having its principal place of business at [Buyer Registered Office Address], bearing GSTIN / PAN [Buyer GSTIN / PAN] (hereinafter referred to as "Buyer").

Vendor: [Vendor Legal Entity Name], a legal entity registered in India, having its principal place of business at [Vendor Registered Office Address], bearing GSTIN / PAN [Vendor GSTIN / PAN] and Udyam Registration No. [Vendor Udyam Reg. No.] (hereinafter referred to as "Vendor").

RECITALS

WHEREAS, the Buyer desires to procure goods and/or services from the Vendor, and the Vendor is willing to supply the same, subject to the terms and conditions set out herein;

NOW, THEREFORE, in consideration of the mutual covenants herein and for good and valuable consideration, the parties agree as follows:

TERMS AND CONDITIONS

1. Scope of Supply. The Vendor agrees to supply, deliver, and install (as applicable) the following goods and/or services: [Description of goods or services supplied], in strict accordance with the specifications, standards, and delivery schedules mutually agreed in Purchase Orders issued by the Buyer from time to time.

2. Pricing and Payment Terms. The Vendor shall invoice the Buyer at prices mutually agreed in writing. The Buyer shall make payment within [Payment Terms] calendar days from the date of receipt of a valid, undisputed invoice and delivery of conforming goods/services. In accordance with the Micro, Small and Medium Enterprises Development (MSMED) Act, 2006, payment terms shall not exceed forty-five (45) days for MSME-registered vendors.

3. Delivery and Risk. All deliveries shall be made to [Delivery Address] within [Delivery Timeline] calendar days from the date of the relevant Purchase Order. Risk in the goods shall pass to the Buyer upon physical delivery and written acknowledgement of receipt at the delivery address.

4. Quality and Warranty. The Vendor warrants that all goods and services supplied shall: (a) conform to the agreed specifications; (b) be free from defects in material and workmanship; (c) comply with applicable Indian standards (BIS) and legal requirements; and (d) be fit for their intended purpose. This warranty shall remain in effect for twelve (12) months from the date of delivery.

5. Indemnification. The Vendor agrees to indemnify, defend, and hold harmless the Buyer and its officers, directors, and employees from and against any and all claims, liabilities, damages, losses, costs, and expenses arising from: (a) the Vendor's breach of this Agreement; (b) defective goods or services; (c) infringement of third-party intellectual property rights; or (d) the Vendor's negligence or wilful misconduct.

6. Confidentiality. Both parties agree to maintain the confidentiality of the other party's proprietary information, business data, pricing, and trade secrets disclosed in the course of this Agreement. This obligation shall survive termination for three (3) years.

7. Term and Termination. This Agreement shall remain in force for one (1) year from the Effective Date and shall automatically renew annually unless terminated by either party with thirty (30) days' written notice. Either party may terminate immediately upon material breach unremedied within fifteen (15) days of written notice.

8. Governing Law and Dispute Resolution. This Agreement shall be governed by the laws of the Republic of India. Disputes shall be resolved by arbitration in [Governing Court Location / City] in accordance with the Arbitration and Conciliation Act, 1996.

EXECUTION

IN WITNESS WHEREOF, the duly authorised representatives of both parties have executed this Vendor/Supplier Agreement as of the date first written above.

Vendor / Supplier Agreement format (India): page one of the document, with each blank to fill in shown in brackets

The provision behind this document

Section 7, Arbitration and Conciliation Act, 1996 — It has to be in writing, and it has to be an agreement to submit disputes to arbitration — a clause naming a city is not enough.

Section 7, Arbitration and Conciliation Act

Related statutory compliance tools & calculators

GST Late Fee Calculator 2026 — Calculate CGST/SGST Section 47 late fees and Section 50 interest
TDS Late Payment Interest Calculator — Calculate section 398 interest and section 427 late fees (formerly 201(1A) and 234E)

What this document must contain (Clause-by-Clause Matrix)

Vendor / Supplier Agreement — Mandatory Clause Matrix & Statutory Protection (2026)
Essential Clause	Legal Purpose & Protection	Governing Law / Benchmark
The vendor's Udyam registration number	This is the single most valuable field on the document. Udyam registration is what establishes MSME status, and MSME status is what triggers the payment ceiling and the interest remedy under the MSMED Act. Omit it and the strongest remedy is undocumented.	MSMED Act, 2006 — s. 15
Payment terms within the statutory ceiling	Under s. 15 of the MSMED Act, 2006, payment to a registered micro or small enterprise is due on the agreed date, and where no date is agreed the period cannot exceed 45 days from acceptance. A contractual 90-day term does not lawfully displace that.	MSMED Act, 2006 — s. 16
A precise scope of supply	Specification, quantity, grade. 'As per discussion' is not a scope, and it is the phrase that appears in most disputes.	Indian Stamp Act, 1899 — s. 35
Delivery timeline and acceptance procedure	The acceptance date is what starts the payment clock. Define how goods are inspected, in what window, and what happens on rejection.	MSMED Act, 2006 — s. 15
Warranty, defect liability and remedy	Repair, replace or refund — and who bears freight. Without this, the answer is negotiated after the dispute has already started.	MSMED Act, 2006 — s. 16
GSTIN and PAN for both parties	Required for the tax position to work, and it identifies the entities precisely rather than by trade name.	Indian Stamp Act, 1899 — s. 35
Termination rights and notice period	Both for cause and for convenience. A supply relationship with no exit is a supply relationship you cannot fix.	MSMED Act, 2006 — s. 15

The vendor's Udyam registration number — This is the single most valuable field on the document. Udyam registration is what establishes MSME status, and MSME status is what triggers the payment ceiling and the interest remedy under the MSMED Act. Omit it and the strongest remedy is undocumented.
Payment terms within the statutory ceiling — Under s. 15 of the MSMED Act, 2006, payment to a registered micro or small enterprise is due on the agreed date, and where no date is agreed the period cannot exceed 45 days from acceptance. A contractual 90-day term does not lawfully displace that.
A precise scope of supply — Specification, quantity, grade. 'As per discussion' is not a scope, and it is the phrase that appears in most disputes.
Delivery timeline and acceptance procedure — The acceptance date is what starts the payment clock. Define how goods are inspected, in what window, and what happens on rejection.
Warranty, defect liability and remedy — Repair, replace or refund — and who bears freight. Without this, the answer is negotiated after the dispute has already started.
GSTIN and PAN for both parties — Required for the tax position to work, and it identifies the entities precisely rather than by trade name.
Termination rights and notice period — Both for cause and for convenience. A supply relationship with no exit is a supply relationship you cannot fix.

When you need this

Before the first purchase order to a new supplier, not after a dispute
When you are the supplier and want the 45-day payment ceiling documented
Where quality, quantity or delivery timing genuinely matters to your own customers
When the vendor will hold your customer data, which pulls in a separate DPDP obligation
Where the relationship is recurring rather than a single transaction

The law that governs it

MSMED Act, 2006 — s. 15 — A buyer must pay a registered micro or small supplier by the agreed date; where no date is agreed, within 45 days of the day of acceptance. The section caps what the parties can agree to, so a longer contractual term does not override it.
MSMED Act, 2006 — s. 16 — On late payment the buyer is liable to compound interest, with monthly rests, at three times the bank rate notified by the RBI. This liability cannot be waived by contract — an agreement to the contrary does not displace it.
Indian Stamp Act, 1899 — s. 35 — Where the agreement is chargeable with duty, it must be stamped before execution or it cannot be admitted in evidence. Duty is State-specific, so the place of execution matters.

Common mistakes

Not recording the vendor's Udyam number, leaving the MSMED remedy invisible on the face of the contract
Writing a 60- or 90-day payment term with a registered micro or small supplier and assuming the contract settles the point
Leaving acceptance undefined, so nobody can say when the payment clock started
No jurisdiction clause, so a dispute begins with an argument about where to have it
Omitting a data protection addendum where the vendor will process personal data on your behalf

Frequently asked questions

What is the maximum payment period for an MSME supplier in India?

Under s. 15 of the MSMED Act, 2006, payment is due on the date agreed in writing, and where no date is agreed, within 45 days from the day of acceptance or deemed acceptance. The section operates as a ceiling on what can be agreed, so a longer contractual term does not lawfully extend it.

What interest applies to late payment to an MSME?

Section 16 of the MSMED Act, 2006 provides for compound interest with monthly rests at three times the bank rate notified by the Reserve Bank of India. It is a statutory liability and an agreement to the contrary does not displace it — which is why it is worth confirming the current notified bank rate when computing a claim.

Does the vendor have to be Udyam registered for this to apply?

The MSMED remedies attach to enterprises registered as micro or small. Capturing the Udyam registration number in the agreement is what puts that status beyond argument later, which is why the field belongs on the face of the contract rather than in a supporting email.

Do I need a separate data processing agreement with my vendor?

If the vendor will handle personal data on your behalf, yes. Section 8(5) of the DPDP Act, 2023 requires a data fiduciary to engage a processor only under a valid contract. A vendor DPA addendum covers that obligation without reopening the commercial agreement.

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