Purchase orders can be an excellent and secure way to buy products and services. There are many considerations for drafting them well.
A purchase order is a type of buy-sell contract between a buyer and seller for products or services.
The key words here are “buyer”, “seller”, and “buy-sell”.
The “seller” may be described as a manufacturer, distributor, wholesaler, retailer, vendor or any other party in an online or offline supply chain.
The “buyer” too can wear numerous alternative wigs or titles.
As regards the “buy-sell” function, properly drafted purchase orders simplify and speed commerce by documenting legal requirements or things worth having.
Purchase order benefits
Purchase orders are a basic in-house standard agreement most established businesses need to have. Purchase orders have many benefits for organisations in business.
- They use easy to grasp underlying concepts – “buying”, “selling” and “buy-sell”. The youngest of children get the idea of “mine” and “yours”.
- They provide many business functions (eg legal, accounting, marketing and sales) with practical and legal data, record keeping and documentation.
- They empower less senior or less experienced personnel buy and sell in a business, with fewer concerns about overlooking legally vital needs.
Why are purchase orders preferred?
For most types of products and services business law has no restrictions on the mechanism which can be used to conduct a buy-sell transaction. Business law permits use of many options. A buy-sell contractual transaction at law can be solely verbal, as it is when buying a coffee at a cafe. Alternatively, contract documentation that is shorter and simpler than purchase orders can be used, eg a quote, invoice, letter agreement or an exchange of emails.
However, it is important to keep in mind that the vast majority of business law disputes involve verbal agreements and either no documentation or skimpy or unclear documentation.
There are at least two further reasons why purchase orders are the preferred option.
Firstly, for major buy-sell transactions it is simply impractical for a buyer or a seller to load those types of communication or pricing documents with the level of practical and legal detail, and careful drafting, that goes into a purchase order.
Secondly, a sophisticated purchase order should allow for the fact that other transaction documents will often be involved, for example specifications and shipping documents. Specifications are common for ordering unique manufactured products, engineered products and software.
Purchase order contents
Purchase orders can cover a very wide range of legal topics. Topics include the obvious or practical ones of goods or services description, price, any applicable delivery date, and refund or replacement of non-conforming or damaged goods. They usually include provisions people more readily regard as being “legal” eg warranties and transfer of title to products.Purchase order layout options
The layout or document style of purchase orders vary. As a species of legally binding agreement they can be designed:
- to begin with a fill-in form (either as a web form layout online or in print) referencing or incorporating legal provisions,
- as an all in one contract in either a schedulised or tombstone layout (whether short or detailed), with identification of parties, recitals, a schedule of variables and other legal provisions, or
- as a terms and conditions document to be used with other transaction documents, eg specifications and shipping documents.
The best purchase order templates can be drafted by an experienced lawyer who creates a customised, in-house template purchase order to suit a specific business and its workflow. This ensures a buyer maximises the benefits of using a purchase order.
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