Its a legal document which is signed two parties for transaction of business where One party
sells products or services on agreed upon terms and conditions.
Most important terms used in purchase orders.(PO):
Apart from general terms like Description , qty , unit price and total others terms and
It could be ex-works , for site , c&f, etc . you have to clearly mentioned the price factor .
PACKING&FORWARDING COST : P&F is declared and put into po .Packing
Whether it is sales tax or other federal taxes . You have to put that into purchase order.
Excise duty if any has to be spelt out in po.
The date on which vendor would deliver the goods to the declared address.
P.O should specifically declare whether goods are covered under insurance or not .It also
specify who would do the insurance .
Freight cost is fixed and who would bear the cost of freight is also finalised.
DEDUCTION AND PENALTIES :
Deduction for delay in delivery or for any features are also finalised during negotiations and
are mentioned in po .
The buyer holds certain amount of money against bank guarantees from suppliers once the supplier
submits the BG the balance payment is released.In case any poor performance or breach in any
terms and condition the buyer may en cash the BG.
Few companies issues an indemnity bond for guarantee of performance .
PAYMENT TERMS :
All type of payment arrangement could be negotiated .LC ,Cash against Documents
Advance payment , against delivery , cash , 15,30,60,90days credit. Staggered payment like
30% against delivery
50% after installation and commissioning
10% after 12 months .
Bank guarantees or Indemnity Bond : Advance payments are subject to bank guarantees for
the advance paid .
FORCE MAJEUR :
This clause is for sellers protection when some incidents happens which is beyond suppliers
control then buyer cannot claims dues from suppliers .Like , earth quake , arson , strikes ,
storm etc .
TERMS USED IN CAPITAL PURCHASES.
SCOPE OF WORK :
Scope of work is defined for both the parties .
WARRANTY AND GUARANTEE FOR PERFORMANCE
Warranty and guarantees are finalised and declared in po for any malfunctioning or
manufacturing defects of machines.
INSTALLATION AND COMMISSIONING :
Installation charges are finalised and declared in po.