Corporate & Securities Law

Adding General Terms to a Stand-Alone Purchase Order

By Ken Adams

My recent post on stand-alone purchase orders prompted a related thought:

When you issue a stand-alone purchase order (in other words, one not issued under a master contract), you could incorporate the general terms (in other words, everything that doesn?t relate to deal-specific matters such as product and price) in different ways. You could include them with the purchase order, you could park them on a website, or every year you could send your suppliers the general terms that apply to all purchase orders until the next set of general terms you issue. In the case of options two and three, the purchase order would contain a notation regarding which general terms apply.

Options two and three would have economy in their favor?you wouldn’t have to weigh each purchase order down with a set of general terms. That would speed transmission of POs by EDI (electronic data interchange) and by fax. On the other hand, if the recipient of a given PO isn’t familiar with the general terms, not including the general terms would give the recipient an extra hoop to jump through. It’s a tradeoff.

If you’re going to put the general terms on a website, bear in mind two issues that I’ve written about. Drafters sometimes fail to properly make a “virtual attachment” part of a contract; see this October 2007 blog post. You’d want to make sure that an analogous problem doesn’t arise with respect to having a set of general terms apply to a given PO.

And you’d be faced with the issue of whether you could unilaterally amend your general terms; see this July 2007 blog post. The conservative approach, by far, would be not to unilaterally amend your general terms. Instead, you’d put up a new web page for your revised terms, and they’d apply only to POs issued thereafter.

Otherwise, I’d be interested in your thoughts as to when it’s appropriate, or not, to use each of the different methods.

Full post as published by AdamsDrafting on March 09, 2010 (boomark / email).