Purchase Order Contract – All Legal Aspects Of Purchasing

You see, legal concepts are embedded in pretty much all aspects of public purchasing. In essence, purchasing fields are about nothing more than contracts and legal enforceability of contracts is a very important aspect of any successful program for public purchases. Efficiency, quality, customer service, integrity, effectiveness, etc. are all just as important.

Nevertheless, basic training in bidding and contract laws is a very important component when it comes to the professional development of procurement officials. Even though there is some amount of awkwardness in every single organization and its unique approach, there is a general idea of how everything needs to work, and once you gain an understanding of that, the rest just starts making sense right away.

Is a purchase order a binding contract

The first question you must have about this all is is a purchase order a binding contract. The answer to this question is yes.

It is a contract which is enforceable by law, and the seller is bound to provide you the specified quantity of the mentioned product or service for the specified price according to the delivery schedule promised. There are no two ways about this.

It is very important that all procurement employees are trained to understand how each and every aspect of this entire process works. If they are not fully aware of how the organization operates, it may become very difficult for them to get in line with what the company seeks from them.

Apart from purchasing, another very important thing which procurement officers need to be thought is ethics. This is of primary importance in fact when it comes to dealing with multiple other parties on an organization’s behalf. Ethics is a very broad topic in itself and in certain ways it is very distinct from legal aspects. But it’s inclusion here just goes to show that it is a very important aspect even here. While legal compliance is something which people should view as the minimum, it certainly isn’t the ultimate standard that they should be striving for. They are a floor, not a ceiling.

A very important management decisions which will have some significant ramifications legally is the amount of discretion or delegated authority that is given to the purchasing staff. This means determining whether they are responsible for routine purchases or if they are in control of the acquisition of all of the requirements of the company. This is generally going to depend on the goods which are purchased, the expertise level of the employees, the amount of autonomy available, and the centralization of the entire purchasing function. Some of the other factors which you need to consider include the below:

  • Authority limits
    It might be advisable for you to establish the type of commitment and set the financial limits in advance which individual staff are allowed to enter, with or without counter-signatures or approvals from managers.
  • Awareness of contract laws
    Purchasing staff needs to be aware of all the legal issues which are likely to arise as a routine part of their job, especially when it comes to contract law. In particular, they need to know when the company might be bound legally and when contracts can be terminated or varied. Training in these areas is something which absolutely must be considered.
  • Safety and quality
    As a part of the procedure for risk management, you need to ensure only reputable suppliers are chosen, and that these suppliers comply with all obligations to you under the health and the safety laws so as to provide and to update safety information for industrial products and substances. They also need to get along with you generally when it comes to risk management and quality initiatives as far as customers, employees and anyone else is concerned. This co-operation could even be reinforced by including various contractual obligations as part of your purchasing documentation.
  • Monitoring supply contracts
    If you have multiple suppliers, it is very important for employees to be well aware of the legal aspects of purchasing. This is the only way you can be sure to allocate responsibility for guaranteeing purchase and performance levels, deadlines and ordering requirements, contract dates, thresholds, notice dates, renewal, termination dates, etc. are complied and monitored regularly.
  • Letters of intent
    It’s quite common for goods and services to be supplied even before the purchase order contract has been put in place. In such situations, there is one party which can ask for a letter of intent in order to document the understanding which has been arrived at regarding the supply of the goods and the services which is taking place even before the contract was signed. Practically, these pre-contract supplies might be unavoidable in some situations, but these arrangements can end up being quite treacherous when there is no purchase order contract in place. If you are asking yourself, is a purchase order a binding contract, the short answer is yes. So make sure you have one in place well in advance.
  • Tenders
    If there is a large project, then you might consider getting a competitive tender opened. One of the most important considerations here is the status of this tender especially since you will be bound to go with the tender which is the lowest. Going through a tender will also mean you should get expert advice from professionals while drafting the tender specifications and comparing all of the bids which you have received since they may not all be on the same base.

Writing on legal concepts for a general audience is a very difficult task and the amount of detail which should be included is arguable. But, at the end of the day, the most important factor is getting the point across and as long as that is something which this article has managed to do it should be considered a good one. Hopefully, you have now understood where the legal aspects of purchasing can come into play and why they are so important for you. This is exactly where Precoro comes into the picture. Visit our website for more information on this topic.