Purchase Order Terms And Conditions Best Practices And Examples You Can Use Construction Purchase Or (2024)

Purchase Order Terms And Conditions Best Practices And Examples You Can Use Construction Purchase Or (1)


Purchase Order Terms And Conditions Best Practices And Examples You Can Use Construction Purchase Or (2)

Most scroll past them, but terms and conditions protect the rights of everyone involved.

Ensuring the right terms and conditions are part of your purchase orders will not only make it easier to do business and track essential information but ensure you’re protected if and when things go wrong.

Understanding the importance of terms and conditions, and the key components they include means your company can protect itself from exploitation while still obtaining the raw materials, products, and services it needs to do business.

In this article, we’ll discuss purchase orders and their terms and conditions—including examples, best practices, and a word-for-word template you can use as a starting point for your own.

What Are the Benefits of Using Purchase Orders?

To the layman, a purchase order appears to be a simple order form requesting goods and services at a certain price, quantity, and time.

But procurement professionals know about the protections and benefits purchase orders provide.

The benefits of purchase orders include:

Provides Legal Protection

Helps Control Business Spend

Gives Spend Transparency

Accurate Financial Reporting

Better Cash Flow Management

Better Budgeting and Planning

3-Way Matching

Purchase Order Terms And Conditions Best Practices And Examples You Can Use Construction Purchase Or (3)

Terms and conditions are an essential component of the purchase order contract because they protect the buyer from malfeasance and provide recourse should something go wrong.

What Should a Purchase Order Include?

A purchase order needs to include your exact expectations from the supplier. Not just the amount and price, but every factor that matters for your purchase.

Setting clear expectations and having robust terms and conditions ensure that you get the right goods and services when you need them.

A purchase order should include the following:

  • Your company name, address, phone number, contact email address, and usually your company logo
  • Order date
  • Purchase order number
  • The supplier’s company name, address, phone number, contact email address, and your specific contact person
  • The product(s) or service(s) to be purchased including specifics (brand names, SKUs, model numbers, etc.)
  • Quantity per item
  • Price per unit
  • Delivery date
  • Shipping address and shipping contact information
  • Billing address
  • Any discounts applied to the order per contract terms with the vendor
  • Payment terms for when the invoice will be paid
  • Terms and conditions (these should be included with every purchase order)

Purchase Order Terms And Conditions Best Practices And Examples You Can Use Construction Purchase Or (4)

The standard format for a purchase order can vary per company but will usually include a number of sections:

  1. Header
  2. Supplier information
  3. Delivery information
  4. Item information
  5. Order total
  6. Terms and conditions

Purchase Order Terms And Conditions Best Practices And Examples You Can Use Construction Purchase Or (5)

What Are Purchase Order Terms and Conditions?

Purchase order terms and conditions are the legal contract between your company and the vendors you rely on.

They include things like the cancellation period for the purchase order, detailed expectations on pricing and delivery, and laws that must be complied with.

Purchase order terms and conditions are essential in a new business relationship where trust hasn’t yet been established.

They protect your company’s interests and ensure legal protection in the case of the under-delivery of goods and services.

Additionally, these terms can outline the procedures for handling disputes and specify penalties for non-compliance, providing a clear framework for accountability.

They also serve to protect intellectual property rights and safeguard confidential information shared during the business transaction.

While terms and conditions will legally protect your purchase, good supplier relationships are still important to maintain.

When you have a good relationship, you should be able to resolve a dispute without relying on legal documents. The terms and conditions are used only as a fallback to friendly communication.

When you have a good relationship with your suppliers, you should be able to resolve disputes through friendly communication. Purchase order terms and conditions are used only as a fallback option.

Why Are Purchase Order Terms and Conditions Important?

Purchase order terms and conditions are important because they protect your company in the following ways:

Create a Clear Legal Framework

Reduce the Possibility of Litigation

Enforce Compliance and Limit Liability

Purchase Order Terms And Conditions Best Practices And Examples You Can Use Construction Purchase Or (6)

What Should Purchase Order Terms and Conditions Include?

Purchase order terms and conditions should include every detail about the purchase order’s expectations, obligations, penalties, and incentives.

They should be as clear as possible so they can’t be misunderstood. Terms and conditions vary depending on need, and shouldn’t be exactly the same as your competitors.

Most of what your purchase order terms and conditions include fit under the following categories:

  • What you’re agreeing to in terms of purchase price, quantity, and reasonable time for delivery
  • What happens in the event of failure to deliver
  • The cancellation period for the purchase order
  • What the expected quality should be
  • A broader definition of payment terms (beyond Net 30)
  • Indemnification clauses should the vendor breach the contract
  • Confidentiality agreements/proprietary information
  • Contract termination agreements
  • Information on warranties and buyer’s rights
  • Applicable federal and local laws and ordinances to comply with
  • General liability and certificate of insurance requirements and/or exemptions
  • Workers’ compensation requirements
  • Requirements of working with independent contractors and subcontractors
  • Responsibility for attorney’s fees or other fees should they get involved

Terms and conditions are detailed and exhaustive, and certainly, there are more than what’s provided in this list.

That’s why we’ve provided a sample of terms and conditions that you can use as a starting point below.

Once they’ve been formalized, your purchase order terms and conditions can be automatically included for every purchase order sent from your procure-to-pay software.

This tool ensures all general terms and conditions protecting intellectual property rights, trade secrets, and other proprietary information are included by default.

Your terms and conditions may not be the same as those of your competition, or even most companies in your market—what matters is aiming for maximum detail and specificity when laying out expectations, obligations, penalties, and incentives.

Sample Purchase Order Terms and Conditions

The first step in drafting terms and conditions of your own is to work with your legal team to identify the details you want to formalize and include in every transaction.

The second is identifying the key parts of an effective set of terms and conditions, and writing each section to fulfill their respective purposes.

Your terms and conditions may not be the same as those of your competition, or even most companies in your market—what matters is aiming for maximum detail and specificity when laying out expectations, obligations, penalties, and incentives.

Let’s look at a set of sample terms and conditions for Company X, located in London.

NOTE: All examples presented are for discussion purposes only, and should not be used or modified except under the guidance of your legal professionals.

Planergy does not provide legal advice or legal documentation.

When composing, modifying, or approving any contract or other legally binding document, we strongly advise you to seek independent legal advice.

GENERAL

PURCHASE ORDER

  • correspond with the quantity, type, sort, quality, and description defined in the purchase order;
  • meet performance standards, benchmarks, and delivery schedule specified on the purchase order or as specified to the Vendor by CPX;
  • be of satisfactory quality (as defined by the Sale of Goods Act 1979) and fit for any purpose specified by the Vendor or specified to the Vendor by CPX;
  • where applicable, be free from defects in design, materials and workmanship and remain so for a period of 12 (twelve) months from the delivery date;
  • comply with all applicable statutory, legal, and regulatory requirements relevant to the manufacturing, production, labeling, packaging, storage, handling, and delivery of the specified goods.

2.2 Should the goods and/or services provided fail to comply with the CPX purchase order and/or submitted instructions, CPX may, at its option, either return the goods to the Vendor at the Vendor’s own expense and risk of loss; reject the goods and/or services at the seller’s risk; require the Vendor to replace the goods or re-perform the services; accept in whole or part such goods and/or services supplied by the Vendor without prejudice to or limitation of any rights held by CPX to claim damages or other compensation for loss, damage, or material failure suffered as a result of the Vendor’s failure to comply with these terms and conditions.

2.3 In the event the seller fails to deliver the goods, or perform the services, specified by the date specified in the purchase order, CPX may, at its option, terminate the contract without notice.

PRICING, PAYMENTS, AND OFFSET

INSURANCE AND INDEMNITY

CONTRACT CONFIDENTIALITY

CONTRACT TERMINATION

  • Commits a material or persistent breach of contract and (provided said breach may be remedied) fails to make good faith remedy of said breach within 7 (seven) days after receiving notice of the breach;
  • Commits a material breach which cannot be rectified;

CPX may opt to terminate the contract with immediate effect.

Purchase Order Terms And Conditions Best Practices And Examples You Can Use Construction Purchase Or (2024)

References

Top Articles
Latest Posts
Recommended Articles
Article information

Author: Van Hayes

Last Updated:

Views: 5837

Rating: 4.6 / 5 (66 voted)

Reviews: 81% of readers found this page helpful

Author information

Name: Van Hayes

Birthday: 1994-06-07

Address: 2004 Kling Rapid, New Destiny, MT 64658-2367

Phone: +512425013758

Job: National Farming Director

Hobby: Reading, Polo, Genealogy, amateur radio, Scouting, Stand-up comedy, Cryptography

Introduction: My name is Van Hayes, I am a thankful, friendly, smiling, calm, powerful, fine, enthusiastic person who loves writing and wants to share my knowledge and understanding with you.