A purchase order is a formal offer to buy detailing prices and descriptions for goods and services. It clearly expresses item, quantity and price. This allows both parties to know exactly what will be purchased, when and what the payment terms will be. If the purchaser only pays invoices that correspond directly with purchase orders they can avoid fraudulent invoices.
If the purchase order is accepted by the seller then it becomes a legally binding document. The details should be carefully checked as to price, shipping details, payment terms and contract terms. Once it is accepted it becomes a legally binding document.
A purchase order that has been issued by a buyer and accepted by a seller is a binding contract. The seller is therefore protected should the buyer fail to pay.
A purchase order needs to be signed by the seller as evidence of their acceptance of the offer to buy. It is good practice for the buyer to sign the document as well when issuing it.
A purchase order would normally be drafted by a lawyer or the employee in charge of requisitions. All of the relevant details of purchase should be included. The more information that is included in the order, the less likelihood of misunderstandings or disagreements later on.
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