Purchase Terms and Conditions

Purchase terms and conditions are provided by one trading company to another detailing the terms upon which they will do business (e.g. sell, supply or purchase goods or services).

A business seeking to purchase goods and services may try to impose its own terms on the purchase possibly via a purchase order. This can create a dilemma for a small business as if they proceed with the order they could be bound by the unfavourable terms of the buyer. And if they choose not to proceed, they risk losing business.

This dilemma underlines the importance of applying your terms and conditions to all your client documentation.

What to do when faced with Purchase Terms and Conditions

When trading with a client who expects goods or services on credit, a business needs to disclose its terms in a commercial transaction for them to be recognised. Some businesses only place their terms and conditions on their invoices. Whilst this serves as an important reminder of your terms, doing this alone is insufficient and too late for them to be effective and enforceable.

Instead it is good practice to ensure that your terms are the first to be presented prior to any business being agreed... and also the last.

Why?

Because whilst your quotation may specify payment within 14 days, your client may accept your quote with their own purchase order, upon which are imprinted their terms and conditions. One of the dangers (to your cash flow) is that your client could state that payment will be made in 60 days or longer! If you accept this purchase order then you are also obliged to accept their terms and conditions.

How do you do overcome this situation?

Well, your business should issue a Confirmation of Order, with your terms and conditions on the back and referred to on the front. Now, you can proceed with the transaction that you have contracted to knowing that your terms and conditions will prevail.

So if the only place you apply your terms and conditions is on the back of your invoices, then these might only be seen by your client after the agreement to supply your goods and services has been finalised. It follows that your terms will not prevail over the terms and conditions presented by the client company earlier.

To summarise, ensure that you are the first and last to present your terms to ensure they have priority in case of dispute.

Want to learn more? Why not read about General Terms and Conditions which provides a useful insight or find out more about How termsandconditions.co.uk Ltd creates terms and Why terms and conditions are important?

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