Designing a Legally Binding B2B Sales Process (Part II) - Purchase Orders

Updated on 11/09/2019

In this article, you will learn about:

The importance of having carefully reviewed Purchase Orders

How to link Purchase Orders to your Terms & Conditions

How to record Purchase Orders acceptance

Topics covered: B2BSales ProcessPurchase Orders

This article is the second of a series where we share tips to help you set up a legally binding B2B sales process. Check out Part I of this series, focusing on the drafting of your Terms & Conditions.

Step 2/3 | Send Out A Purchase Order That Links Back To Your T&Cs

The Purchase Order is a short-form document that contains the detailed offer for your products or services.

The idea is to use the Purchase Order as a tool to tie your customer to your T&Cs. Such Purchase Order will be considered under most EU countries' laws as an offer, i.e. a firm proposition from a party to enter into a contract with another party under specified conditions. An offer just needs to be accepted by your customer to form a valid, binding contract. So by accepting your Purchase Order, your customer will be bound by the provisions of your T&Cs (and you will be able to enforce them if need be).

Please bear in mind that for this contractual mechanism to work, the Purchase Order must:

  • Provide the essential information about the products and services sold;
  • Be validly accepted; and
  • Reflect your T&Cs through a durable medium.

Let us focus on each of these bullet points.

What information must be included in the Purchase Order?

Your Purchase Order will create a valid and binding contract if it contains essential information about your products and services. Essential information includes:

  • The full corporate details of your company;
  • The main characteristics of your products and services;
  • The estimated timelines for delivery or completion;
  • A detailed breakdown of your fees (shipping, packaging, etc.) and applicable taxes (e.g. VAT)

The idea here is to be as precise as possible to avoid any potential for dispute. However, there is no need to duplicate any information from your T&Cs (if those are provided on a durable medium). It is good practice to let your T&Cs handle the standard legal stuff (such as the duration of the contract, the payment and invoicing methods, the product guarantees, etc.). Your Purchase Order should contain all the commercial aspects (number of users, details of the fees, etc.). If a customer has an issue with the content of your T&Cs, don't change the content for him. Instead, provide the necessary arrangements directly in your Purchase Order (as any element from your Purchase Order will prevail over contradictory provisions from your T&Cs). You should never change the content of your T&Cs for one particular customer (otherwise, you will end up with multiple versions of your T&Cs, each different from one another, which will make it very hard for your business to process).

How to prove that the customer accepted the Purchase Order?

Under most EU countries' laws, professionals are free to use whichever element they can get hold of to prove their claims. Proof of commercial transactions may be provided in writing (contracts, invoices, accounting documents, etc.) or by other patterns (such as proof that the customer obtained a license for a SaaS or paid for a particular service). Of course, a signed contract will be a more convincing proof than a simple handshake. So better have that right.

A sound approach would be for you to:

  1. Send a Purchase Order by email to your counterpart;
  2. Ask your counterpart to return a signed version of your Purchase Order by email.

This is as simple as that. Your counterpart may print the Purchase Order, sign it in writing and scan it back to you or may superpose a digital copy of his or her signature. The most important thing for you is to get a signed Purchase Order back from the email address of an authorised signatory (i.e. a person having the internal powers to sign on behalf of your customer - like the CEO or a board member). That way, in case things go sour, you can always point out to that signed Purchase Order that was sent from that particular email address. The signature and the email address function as a kind of "double-factor authentication" (i.e. you can establish that the person accepted the Purchase Order by relying on (1) the signature of an authorised person and (2) the fact that the Purchase Order was sent through his or her professional email address). Really, that's all there is to it. If you want to be absolutely sure of the identity of the person signing your Purchase Order, you may use qualified electronic signature providers. However, this will add only a little extra in legal comfort while proving to be quite a hassle for your customers down the line (in terms of authentication and user-friendliness). Some customers may even object to sign documents electronically or require two authorised signatories to confirm purchase orders of a certain value. Anything that makes the life of your customer more difficult should be seen with the necessary circonspection.

How to guarantee the authenticity of your T&Cs?

You must provide your T&Cs on a durable medium to guarantee their authenticity. What does it mean? The concept of "durable medium" was coined by the European Court of Justice. It means that your T&Cs should be available in a format allowing your customers to reproduce its content unchanged from the moment it was first made available to them. The crux of the requirement is quite obvious: you cannot be in a position to change the content of your T&Cs after you disclose them. Hence, your customers will be tied to the version applicable at the time they signed your Purchase Order.

This is why saddling your Purchase Order with hyperlinks pointing at the T&Cs hosted on your company's website will not work. Since you control the content on your website, you are in a position to change the wording of your T&Cs at will. You must therefore resort to attaching a PDF version of your T&Cs in the email containing your Purchase Order. However, this can prove impractical. First, it is easy to forget to attach your T&Cs along with each offer you submit. Second, your CRM (customer relationship management) software may not allow you to attach documents when sending out Purchase Orders through their interface. Third, your staff may inadvertently attach the wrong version of your T&Cs (this is frequent in heavy-regulated industries where T&Cs change frequently). Fourth, long jargon-filled T&Cs may scare away your customers or entice them to negotiate.

Fortunately, you may host your T&Cs on legal-as-as-service platforms (like Companyon's Legal Portal). Since they host your legal documents for you, they are able to guarantee the authenticity of your legal content (through time-stamped versions). Hence, your T&Cs will be considered as being published on a durable medium.

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