Register now or log in to join your professional community.
A purchase order contains standard terms and conditions about specifications, delivery time, delivery terms, payment terms, warranty conditions etc. When this purchase order is signed by both the Purchaser and Supplier and the Supplier receive a copy of purchase order with acknowledgement, it becomes a Formal contract
For a PO to be considered a formal contract, the following has to be fulfilled;
> Official/Formal valid quotation from vendor
> Clear/confirmed acceptance of company T&C including specifications/SOW by vendor
> PO is issued during the validity date of quotation
> Approved by an Authorized Person in company
> Printed or transmitted thru official company document/channel
Failure to meet any of the above could cause rejection from other party.
However, in some companie,for low value purchases, a verbal/Phone call from vendors will be considered as a quotation to issue a PO and vendor acceptance will make it formal contract.
A purchase order is an offer of purchase, usually issued apropos an offer, quote or agreement. it would contain the specifics of the products/services and the consideration as prices along with the terms of payment, incoterms/delivery. It can be treated as a formal contract on authorized acceptance by the supplier.
When a supplier receives the Purchase Order, it is binding. If you need a 'safeguard', then I would suggest the inclusion of 'terms and conditions'.
A purchase order will be considered a formal contract when it has proper binding clauses for both the purchasing organization and the vendor.
when accepted and signed by the other party without any conditions or revisions
The answer is in the definition of the contract itself , contracts should have : Offer, Acceptance and consideration. If these components are there then a purchase order is a contract.
Once you raised a purchase order and it is accepted by a seller forms a contract between the buyer and seller.
Always. It's a formal document placing the order and in all effect it is as binding as a contract. Or a handshake, for that matter!
A purchase order is a contract with terms and conditions that are associated with it and it is used for purchases of deliverable goods, continuing services (e.g., software licenses, etc). A formal contract should be used if there is more risk involved, if the amount of money involved is high or when it is prudent to detail specific negotiated terms and conditions, including a Statement of Work within a legally binding document.
However, for both the part, the purchase order considered as an important and inseparable part of formal contract.
