Is a purchase order a type of contract?
Explore the differences between a contract and a purchase order to create a better experience for your customers.
Businesses create contracts and purchase orders to enter into legally-binding relationships with customers or other companies. Although the two are similar, understanding the difference between a contract and a purchase order is important — especially for documentation purposes. Want to know if a purchase order is actually a contract? Read on to learn the answer.
Let’s talk about contracts.
A contract is a relatively broad term for a legally-binding document that outlines an agreement between two or more parties. Contracts determine the conditions of an agreement, personal or professional, such as:
- The value of a product or service
- The duration of an agreement
- A legal obligation to complete a task, or not take a particular action
Contracts take several forms and can be either a written or oral agreement. A few examples of common business contracts include:
- Non-Disclosure and Non-Compete Agreements
- Real Estate Lease Agreements
- Employment Agreements
Tell me about purchase orders.
In general terms, a purchase order (also known as a PO) is a document sent from a buyer to a seller, distributor, or manufacturer requesting to purchase a product. Plus, a purchase order becomes a legally binding contract after the seller accepts the order.
Once accepted, the buyer is legally obligated to submit payment for the product, and the seller is legally obligated to deliver or produce the product. Purchase order documents typically include at least:
- Contact information for the buyer and seller
- A description or unique value identifying the product requested
- The quantity of product
- The cost per unit and total cost
Because manually filling out purchase order forms is time-consuming, many businesses choose to digitize the process with a business solution and e-signature software like Adobe Sign. They make it easy to create, customize, send, and sign purchase order agreements without having to print a single document. Plus, your purchase orders are safe and secure because every e-signature has end-to-end encryption.
Explore what more you can do with Adobe Sign today.