Purchase Order Terms and Conditions

Purchase Order Terms and Conditions

Date: July 26, 2018

pur·chase or·der

noun.

A buyer-generated document that authorizes a purchase transaction. When accepted by the seller, it becomes a contract binding on both parties. The descriptions, quantities, prices, discounts, payment terms, date of performance or shipment, other associated terms and conditions, and specific seller identities are set for in this document. [1]

Let me start by saying, I am not an attorney. Just been around purchase orders a time or two. If it’s your first rodeo in the P.O. world, don’t worry. Here are the main items that you shouldn’t let your excitement keep you from double checking:

  • Acceptance-

How long do you have to review the purchase order and either accept or reject it? By no means should you rush but you also can’t take your sweet time. Think about it… You review every last period and comma just to find out that you didn’t respond on time and the buyer gave away their P.O. dollars to another vendor! The sheer horror.

 

  • Shipping-

What does the purchase order state as the method of shipment? Are there options or do you have to send it only one way? What are the penalties for not complying with the outlined terms? Maybe the buyer likes everything in pink cardboard boxes. If you send your product in a blue box, does that mean your purchase order is null and void?

 

  • Title and Risk of Loss-

At what point does the buyer become responsible for the product? Basically, this part explains who owns the product before, during and after shipping.

 

  • Inspection and Rejection of Nonconforming Goods-

How long does the buyer have to inspect the goods? What situations allow the buyer to send the product back and if that happens what do you need to do?

 

  • Price-

Can the price change based on unknown variables? Who is responsible for the difference? If the buyer is in control of price change and you are responsible for the difference, you certainly should know about it.

 

  • Payment Terms-

When and where do you send the invoice for the purchase order? What is the buyer’s standard timeline for paying invoices? This seems like a given but you want to make sure that you know when and how to get paid!

 

  • Warranties-

The purchase order will outline the expectations of the vendor and the goods that are being purchased… because it’s a contract and no one wants to buy bad product.

 

  • General Indemnification-

If some goes wrong with the product, like they all malfunction and catch on fire, how does the buyer expect the vendor to protect them? I know, that will never happen… but what if it does?

 

  • Intellectual Property Indemnification-

Specific to intellectual property, if problems arise with infringement, how does the vendor protect the buyer?

Let’s get real here… being in the business of IP, shame on you if you are knowingly selling product that is infringing. I would like to assume that 95% of the time, this is for unknowing situations and the buyer simply wants to make sure they aren’t on the line with you.

 

  • Insurance-

There is very little chance that a buyer will not require you to carry product liability insurance. This section states requirements of the policy and what the vendor needs to have in place in order to accept the purchase order. It is also common for a buyer to ask that the policy names their company.

 

  • Compliance with Law-

What are the expectations of the vendor for regulatory compliance? Almost all industries have regulations for products and your product needs to comply… end of story.

 

  • Force Majeure-

If a buyer wants to cancel the purchase order, what happens next? Does the cancellation need to happen before shipment, with a written notification and at what time is cancelling not an option?

 

If you’ve made it this far, kudos for your eagerness to learn or better yet, congratulations on your purchase order! Now go out, fill it, make more product and keep growing your business!

 

⇑ That’s me.

Lindsey Yeauger is an Executive Vice President for Idea Buyer. You can contact her directly for more information and help with purchase orders at Lindsey@ideabuyer.com

[1] http://www.businessdictionary.com/definition/purchase-order.html

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