Purchase agreements vs purchase orders

Purchase agreements vs purchase orders

More than once, when I review Purchase Agreements (PA) that buyers have already signed with his or her supplier, I’ve found that actually what he signed is a Purchase Order (PO).

Purchase agreements vs purchase orders: What’s the difference?

A Purchase Agreement is an agreement signed by both buyer and supplier focused mainly on duty and rights of both parties. This includes General Terms, such as language, choice of jurisdiction, etc. the main points in a PA may include: responsibility of each party, inspection, price and payment, confidentiality, inco-terms, term and termination, molds, remedy for breach of the contract, place and acceptance of order, warranty, etc.

In conclusion, PA’s clearly define expectations by both parties and more importantly, also specifies a remedy if either party fails to comply with the specifications of the PA.

Usually when buyers decide to buy from a certain supplier, the buyer will sign a PA with the supplier. The terms of the PA will cover all the orders he is going to place—essentially a catch-all unless otherwise stated.

On the other hand, Purchase Orders’ primary focus are the specific requirement for one single order, it gives all detailed information of one order, the product name, specification, quantity, date of delivery, etc., it may change from time to time. In other words, Po’s solely focus on the product in deal, and leaves other terms to be dealt with by a PA.

Though each focus is different, PA’s and PO’s work together to specify terms of an order. Once a dispute comes to fruition, we will use the PA and the PO as a guide to solve the issue.PO 

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