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Do Purchase Orders Create a Contract?

Do Purchase Orders Create a Contract?A purchase order is a document that a buyer sends to a seller. The purchase order provides details on what the buyer is requesting from the seller. However, the purchase order by itself does not create a contractual agreement between the buyer and the seller.

Purchase orders create a contract when the seller accepts the purchase order.  It is important for both buyers and sellers to understand how the terms of a purchase order affect the final agreement. An Irvine, CA business law attorney at Brown & Charbonneau, LLP can provide details on when a purchase order creates a contract and can help buyers and sellers to understand their rights and obligations that are created when a purchase order is accepted.

Do Purchase Orders Create a Contract? 

In order for a contract to be created, there must be an offer and the offer must be accepted. The purchase order sent by the buyer is making a request that the seller provide certain items at an agreed-upon price. It is the buyer’s offer to purchase the requested items.

The purchase order should provide as much detail as possible so it is clear what the terms of the transaction will entail.  Typically, the purchase order should provide details on the quantity of the items being purchased, the type and quality of the items being purchased and the price that the buyer is going to pay the seller for the items.

When the purchase order is received, the seller has the opportunity to accept the order. If the seller simply fulfills the terms of the order, this is classified as acceptance. In some cases, the seller will send back an invoice or will make changes to the terms of the purchase order. When this occurs, a battle of the forms situation is created.

The purchase order the buyer sent may have some details that differ from the form the seller sent back. A contract can still be created, even if the two forms do not have the exact same details.  Traditionally contract law required a complete meeting of the minds and the two parties to be in agreement on all of the terms of the contract.  This was called the “mirror image” rule and it often meant that when different forms were used, no contract would be created between a buyer and seller.

The Uniform Commercial Code, however, allows a contract to be created even when different forms are used.  When a different form is sent back in reply to a purchase order, this can still create an acceptance of the initial offer and create a legally binding contract.  Additional terms are considered to be part of the contract unless they limit acceptance to the terms of the offer, unless the terms materially alter the original proposed agreement, or unless notification of rejection of those terms has already been given.

Get Help Today

Brown & Charbonneau, LLP can provide assistance determining when purchase orders create a contract and can help you to understand your rights and obligations when a purchase order has been sent or received. Call today at 714-505-3000 to schedule a consultation with our Irvine contract lawyers to learn more.