Purchase order terms are similar across industries, but tailored to parties. Key terms include price, payment, delivery, goods/services, packaging, inspection, delays, risk, and guarantees. The buyer and seller sign the purchase order, which forms the basis of a contract. Payment currency, delivery place and date, goods/services description, and risk of loss are important issues. Purchase order termination provisions usually favor the buyer, but terms should be carefully reviewed.
There is often little variation between purchase order terms in many different industries. The terms are usually the same, but are often tailored to the industry and between parties. Key terms often start with price, payment terms, and delivery. Next, goods and services, packaging and inspection are addressed. Finally, justifiable delays, risk of loss and guarantees are some of the standard terms of the purchase order found in the remaining clauses of the contract. The buyer and seller sign a purchase order, which codifies the terms and forms the basis of a contract.
Purchase order terms and conditions often state the price and payment terms at the beginning of the document. Some pricing terms will indicate the payment currency that the seller can expect. It can also direct the seller to send an invoice to receive payment, often within 30 days of delivery. The terms of delivery should include the place of delivery and the date or number of days that the goods and services should be delivered after the seller has signed the purchase order.
To avoid confusion and clearly define expectations, goods and services are often one of the standard terms of the purchase order. This is a basic description of the tangible items or work the seller agrees to deliver. Packing terms are often included to ensure the goods are not damaged in transit. Inspection is the means by which the buyer can ensure that the goods have not been damaged and the buyer can generally accept or reject the delivered goods within a reasonable time frame.
An important issue in relation to the terms and conditions of the purchase order concerns the risk of loss. The seller or buyer must be financially responsible for damage to or defects in the goods and services up to delivery, and it is often the seller who bears the risk of loss. Some circumstances are beyond both parties’ control, such as a natural disaster, which often delays the delivery of goods or services. Under the excusable delay period, the buyer has the right to withdraw from the contract or extend the delivery date. The seller is often required to sign guarantees as part of the purchase order terms, which certify ownership of the goods and services supplied and that they are free from defects and fit for purpose.
Purchase order termination provisions usually favor the buyer. For example, a term on a purchase order may give the buyer the right to cancel the order before shipment or delivery. It’s important to carefully review all terms of a purchase order, because they can only favor one party until fairer terms are negotiated.
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