AEC definitions
A purchase order is a buyer's written offer to buy specific materials or equipment at a stated price, quantity, and delivery date. When the seller accepts it, it is the contract for that purchase. It is narrower than a subcontract, which buys labor and installation as well as materials.
Definition
Project purchase orders name the job, the cost code, the spec section or submittal, and the delivery place. Flow-down of insurance, liens, and special conditions belongs in the terms or they will not apply. A quote is not a purchase order. A verbal release against an expired quote is a poor contract. Not-to-exceed language, if used, should say whether the seller may bill only actuals up to the cap. The PO number is how the cost hits the job. Material that arrives without one is hard to return and hard to audit.
In depth
The seller's acknowledgment that changes price, lead time, or terms is a counteroffer. The buyer should accept the change in writing or reject it. Silence plus delivery often creates a messy contract on the seller's terms.
Reference the approved submittal. A PO for 'the pump' without the model that was stamped buys the wrong pump.
Lien waivers, insurance, domestic-material rules, and warranty periods do not appear by magic. Short PO terms should incorporate the project requirements by reference and attach them.
A supplier who never saw the specification will ship a catalog product and call the spec the contractor's problem.
A revised PO or a written change records added quantities and expediting fees. An email to the salesperson may not reach accounting. The invoice should cite the PO revision.
Cancellation rights depend on whether the goods are standard or custom. Custom switchgear is not returnable just because the PO was convenient.
If the seller is installing, prevailing wage, safety, and coordination may apply. That is a subcontract. Using a PO to avoid those terms does not avoid the facts on site.
Startup and training should be line items if they are required. A supply-only PO does not include them.
Receivers note quantities and damage. Pay from the PO, the receiver, and the invoice together.
A three-way match is the audit. Paying from the invoice alone buys shortages.
Examples
A PO lists the approved chiller model, the submittal number, the delivery date, and the job cost code. The acknowledgment accepts those terms.
The seller's acknowledgment adds a fuel surcharge. The buyer issues a revised PO that accepts it, or refuses the shipment.
Installation of the equipment is a subcontract. The PO covers equipment only.
FAQ
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