8 Questions You Should Ask Before Signing Any Vendor Contract
Feb 1
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I know. They seriously suck. I’ve read (and/or written) thousands at this point.
Vendor contracts are a bane. A slog. A hurdle, a roadblock. I’ve heard them all.
Something most business owners hope to skim, sign, and move beyond so the “real work” can begin.
That’s a mistake.
Contracts don’t simply govern pricing and services. They allocate risk, responsibility (aka liability, ya dig?), and control, often in ways that only become visible when something goes wrong: Data is misused. A system goes down. A consumer files a complaint. An investor asks questions. A regulator calls.
If you work with vendors who touch your data, your customers, or your operations, for the love of everything sacred please ask these questions you must ask before you sign.
These aren’t edge cases. They’re not theoretical. They’re baseline protections that will keep your business (and the people who rely on it) safe.
I consider the following 8 issues (and sub-issues, let’s be real) non-negotiable in any vendor agreement. (ALL of this information should be easily accessible via the vendor’s privacy policy and terms of service. Those documents sometimes have similar but different titles, like privacy statement, or terms of use. Read them carefully. If you don’t understand something, ask for clarification before you proceed, or hire an experienced attorney to assist you.)
1. How Exactly is the Vendor Allowed to Use Your Data?
Start here. You need precise answers to these questions, at minimum:
What data does the vendor access?
For what specific purpose?
What uses are explicitly prohibited?
If a contract allows data use for vague “business purposes,” that’s a red flag. Ambiguity benefits the party with more leverage, and that’s rarely you.
Clear use restrictions protect:
Your customers from misuse of their data
Your business from regulatory exposure
Your reputation from downstream harm
If a vendor can’t clearly explain what they will not do with your data, don’t move forward.
Period.
2. Who Owns What, Really?
Many disputes stem from assumptions about ownership.
Before signing, confirm:
you retain ownership of your data
you retain ownership of your intellectual property
the vendor receives a limited license, not broad rights
Ownership matters for accessibility, consumer protection, and future growth. If you ever want to switch vendors, merge, or exit, unclear ownership terms can become a serious obstacle.
3. What Happens if the Vendor Gets Sued?
Indemnification answers one core question: who pays when a third party brings a claim?
Most vendors will try to keep indemnification narrow. That’s expected. What’s not acceptable is silence, or one-sided protection.
You should understand:
what claims the vendor will cover
what claims you’re expected to cover
whether data misuse, security failures, or IP issues are addressed at all
This isn’t about perfection. It’s about avoiding surprise exposure.
4. What Is the Vendor’s Actual Liability?
Nearly every vendor contract limits liability. That’s normal.
What matters is what’s carved out.
Ask:
Are data breaches excluded from the cap?
Is gross negligence excluded?
Are confidentiality violations excluded?
A low liability cap paired with broad access to sensitive data is not a balanced arrangement. It shifts risk onto your business, often in ways leadership and boards don’t fully understand until it’s too late.
5. How and When Can You Get Out?
Termination terms matter before the relationship turns sour.
Look closely at:
contract length
auto-renewal provisions
required notice periods
termination rights for cause
If you can’t exit when a vendor consistently underperforms or creates risk, you’re not in a service relationship; you’re trapped.
6. Which Law Governs the Contract?
Choice of law isn’t boilerplate trivia. It determines:
Where disputes are resolved
What legal standards apply
How expensive enforcement becomes
Defaulting to a vendor’s preferred jurisdiction may seem harmless, but it can meaningfully affect your leverage if a dispute arises.
7. How Are Disputes Resolved?
Many contracts require arbitration. Some prohibit class actions. Some restrict remedies.
None of these models is inherently problematic, but you should know what you’re agreeing to.
Are disputes handled in court or arbitration?
Are remedies limited?
Are costs shared or shifted?
These terms shape your ability to assert your rights later.
8. What Are the Vendor’s Privacy and Security Obligations in Practice?
Security promises only matter if they reflect reality.
A solid contract aligns obligations with what the vendor can actually deliver:
incident response timelines
breach notification requirements
training, testing, and audit rights
backup and recovery commitments
Over-promising doesn’t protect you. It perpetuates false confidence.
Why This Isn’t About Being “Difficult”
Vendors resist changes because they operate at scale. That’s understandable.
What’s not acceptable (or sustainable, for real) is businesses of any size signing contracts that:
undermine consumer protection
create accessibility barriers
expose your organization to preventable risk
conflict with your stated values (what are your stated values, by the way?)
Ethical, forward-thinking businesses don’t outsource responsibility just because a contract is “standard.”
The Most Practical Advice I Can Give You
You do not need a months-long legal review.
Instead, invest in one focused hour with an attorney who understands vendor risk, data governance, and your business model.
ROI on that hour? You’ll:
identify which terms matter most
decide where to push back and where to monitor for future risk
avoid agreeing to obligations you can’t meet
protect your customers, your team, and your reputation
Signing a contract without understanding these issues makes you vulnerable. Efficiency has value, but not at any cost.
You’re building something worth protecting. Invest your time wisely.
Before you sign, get clarity. Book a consultation today.