-Answer:
Currently, the Contact record is not one among the lists of entities that may be created from a vendor through the Other Relationships link. This is discussed under Enhancement 133115: Lists > Relationships > Contacts > edit a contact > Info tab > Other Relationships – have the ability to convert a contact to a vendor
An alternate solution to create a contact from a vendor record through the Other Relationships link is to enable the preference: Show Individuals as Contacts under Setup>Company>General Preference.
The above solution would only work if the Entity Type = Individual prior to saving the newly created entity record or existing records may still create a related Contact record through an edit and save process.
Note:
The solution also applies to other record types like Partner and Customer records.
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