The T’s & C’s of a Well Drafted P.O.
By: Craig Watrous
Companies often use very simple purchase order forms without considering the missed opportunity of including important contractual terms. Both buyers and sellers should use detailed purchase orders containing the specific contractual language necessary to protect their interests and accurately reflect the sale/purchase they are making. Many times a company’s standard purchase order forms are missing key “T’s and C’s”, terms and conditions. Using a purchase order form without well thought out terms and conditions can result in serious consequences if a dispute arises. Below is a sample of some elements that should be included in a well drafted P.O.
1. Parties (include not only the seller and buyer but also the address and contact information for each party. It’s also good practice to include the name(s) of the employees authorized to make, accept, and revise purchase orders on behalf of the company)
2. Description of Products (be as detailed as possible, keeping in mind that doing so may create potential express warranties)
5. Place of Delivery
6. Time for Delivery
7. Risk of Loss and Insurance
8. Payment Terms
9. Time for Inspection of the Goods
10. Late Payment Terms: (Include: interest, attorney fees & costs)
11. Jurisdiction/Choice of Law: (This is important in the event of disputes)
12. Representations and Warranties: (What is being warranted and what is being disclaimed? I.e. Title; Patent Infringement; Quality/Express Warranties; Implied Warranties: Merchantability and Fitness for a Particular Purpose?)
13. Limitations of Liability (Examples: no consequential damages, no incidental damages, actual damages, limit damages to repair or replace at seller’s discretion)
14. Merger Clause (I.e. this represents the entire agreement between parties, no other contemporaneous agreements between parties exist, and this P.O. is intended to supersede all prior negotiations between the parties)
15. Dispute Resolution (Arbitration or Courts? Mandatory mediation? Jurisdiction, choice of law?)
16. Acceptance (Including an acceptance clause is an excellent way to preemptively avoid/prepare for a potential battle of the forms)
Mallon & Lonnquist, LLC, is a business, finance, real estate, and litigation law firm, based in Denver, Colorado. Mallon & Lonnquist regularly represents manufacturers, wholesalers, distributors, purchasers, and sellers in both transactions and disputes. Craig T. Watrous can be reached at firstname.lastname@example.org.