Purchase Order Terms & Conditions

When a startup hits targets, a series of round funding follows coupled with a mushrooming workforce and thus increased supply needs. Ultimately, there are two options for managing purchase orders in the procurement process: relying on paperwork or procurement software

Whichever options you select, drafting purchase order terms and conditions is excellent for a smooth procurement process. We'll see why in the following sections. But first, it's essential to understand purchase order terms and conditions are?

Furthermore, you'll learn what constitutes purchase order terms and situations that call for their inclusion. Authorized employees can use them, contributing immensely to the seamless procurement process.

In addition, when the process is merged with procurement software, it is efficient. After a thorough breakdown of purchase order terms and conditions, there's a sample to get things done. The neat template will take guesses off the creation of a simplified purchase order 


What are Purchase Order Terms and Conditions?

A purchase order is simply a formal request to purchase goods, raw materials, or services from a seller. In the case of a robotics or high-tech gadgets manufacturer, the purchase order might be directed to individual components suppliers during the purchasing process.

Besides the purchase order terms, the PO contains the identity and quantity of each requested item, the agreed price for each item, and other information detailing the nature of the purchase request, such as the seller's warrants and desired fulfillment of the request. 

The purchase order terms and conditions prove vital in stating your startup's desires and enhancing protection. Therefore, it's essential to express your startup's wishes in the purchase order and terms. 

You can read more about purchase orders in our article titled "What is a purchase order?

Why Do You Need Purchase Order Terms and Conditions?

Purchase orders terms protect both the seller and buyers in the procurement process by documenting the details of the requested transaction. Here is a list of items contained in a purchase order in addition to the agreed terms.

  • Purchase order number
  • The goods, raw materials, or services being purchased
  • The quantity of the product or service
  • Sellers warrants, goods supplier brand names, SKU, and model numbers.
  • Pricing according to quantity
  • Delivery date
  • Delivery Location
  • Company billing data
  • Purchase order terms and conditions stipulating buyer's and seller's obligations

A startup will benefit through the recourse offered by the PO terms and conditions. The seller should deliver goods or services as stipulated in the terms. If they fail to honor their obligations, such as non-delivery of a portion of goods or services, they are held liable if sued under applicable laws

Another great example is when the seller's failure to deliver goods or services in the standards indicated in the terms. This means the startup may take legal measures to compel performance, restitution, or other means to achieve contract equity.

Again, if the seller's failure leads to a wrong delivery, you can change orders or the seller's expense regardless of how meager it might be. 

On the other hand, the service supplier is protected when he honors the seller's obligations. In short, the seller benefits by having their seller's responsibilities and duties spelled out in the PO purchase terms. If the seller adheres to the prior written consent through the T & C, they are shielded against legal action and other business disruption.

Similarly, a buyer is bound by the written prior written consent agreeing to honor the seller's invoice timely. 

Is a Purchase Order a Contract?

From the information we've discussed on the procurement process so far, you might be wondering if a purchase order is a legally binding contract. The answer is not clear, Yes and No; we'll explain why. Even if the PO terms stipulate the sellers' obligation, they are not legally obligated to deliver on the prior written consent and conditions. 

They are not obliged to fulfill anything even if well documented under the seller's obligation. You are at liberty not to honor the sellers' invoice or change or change order if it happens. If the seller relents, you can pursue legal recourse, especially if the loss was on your startup's part.

Remember, the seller is free to reject the purchase order, assuming there are no terms and conditions under a blanket purchase agreement requiring the seller to accept and fulfill all incoming purchase orders.

However, once the buyer and seller sign the purchase order, it becomes a legally binding contract. This means that legal recourse may be available if the seller fails to deliver or you fail to honor the seller's expenses

Are Purchase Orders Terms and Conditions For Suppliers?

The purchase orders T & C are a vital addition to the purchasing process for buyers and sellers. They protect buyers by establishing a record of their request, including the terms and conditions. This means that if the seller signs the PO and does not perform as agreed, the buyer may be entitled to specific performance or other legal entities.

Sellers also benefit by having a clear understanding of the buyer's expectations. For example, purchase order shipping terms can give the seller the buyer's anticipated delivery date and mode. Other specific terms and conditions provide the seller additional data regarding what the buyer requests and expects.

What Are The Standard Terms and Conditions Contained In a Purchase Order? 

  • Acceptance of terms - outlines what constitutes acceptance of the terms and conditions and the purchase order as a whole, including the purchase order number.  
  • Performance - the specific expectations of each party, e.g., what the buyer and seller will provide. 
  • Inspection - outlines the buyer's right to inspect goods or services before taking delivery. 
  • Payment  - mode of payment, installment terms, due date, interest, or penalties if payment is not made as agreed. 
  • Changes can and cannot be made to the purchase order agreement before and after acceptance.
  • Sellers Warrants - the seller's assurance that items will arrive as described and remedies available if items are damaged, missing, or otherwise unacceptable. 
  • Confidential information - how proprietary and limited-access data shared during a transaction may be used by the seller or buyer and shared with third parties.
  • Termination for convenience - a clause that allows either party to terminate the Agreement without a specified reason (such as non-performance or contract breach).
  • Indemnification - Indemnification - how the buyer and seller will be protected against a breach of any terms agreed on the purchase order. 
  • Limitation of liability  - establishes financial, time, or other limits on the liability either party may incur for damages that occur during or as a result of the transaction. 
  • Patents and data - establishes the property ownership of patents, intellectual property, and data shared between the buyer and seller during a transaction. 
  • Relationship of the parties - defines the specific relationship between the buyer and seller and any third parties involved in the transaction; this may include personal data.
  • Subcontracts and assignments - governs how the seller can and cannot subcontract or assign elements of the work to be performed and how the buyer will interact with subcontractors and assignees.  
  • Compliance with laws - Establishes the rules for determining governing law and addressing non-compliance concerns that may arise during the transaction.
  • Anti-corruption provisions - this clause guarantees both parties assurance of the other's integrity and adherence to local and federal anti-corruption laws. 
  • Insurance - outlines specific insurance requirements for both parties, including coverages and limits.
  • Publicity and disclosure - specifies which information can be shared through advertising and other campaigns and similar interactions where sensitive information could potentially be divulged.  
  • Non-waiver of rights - if one party does not perform as promised, this clause outlines the other party's obligation to waive their rights to a contract breach claim. 
  • Remedies - outlines the specific treatments available to each party if the other does not perform as specified in the Agreement. 
  • Severability - this clause prevents the entire Agreement from invalidating because of a single term or condition.
  • Interpretation - this section of the terms and conditions defines words, phrases, and concepts used throughout the document.
  • Governing law - establishes the jurisdiction governing the Agreement. In most cases, any legal action must be brought forth in the specified location governing the contract.   
  • Entire Agreement - this clause establishes that all of the information and data contained in the Agreement makes up the "entire agreement" - that is, additional provisions cannot be added except upon Agreement by both parties.
  • Survival - this clause outlines which terms and conditions will remain in force after the Agreement expires or otherwise ends.