Purchase Order Legally Binding?

[namesweb]

Hi all

Quick one

We had a customer of ours place an order by sending us an email PO.

Long story short they're trying to claim their customer who they were buying on behalf of has changed their minds.

We produced goods to her order (a specific quantity of particular skus) and made it available for her to collect but she is refusing to do so.

What legal recourse is there?

Is a purchase order legally binding?

Thanks

 

[Deleted member 169416]

Hi

A Purchase Order can be legally binding - as can emails and calls.

The question is:
• whether or not this had been accepted by the parties and a contract entered into; and
• if a contract had been formed, whether they are entitled to cancel at any time.

The answers would depend on the wording of the Purchase Order, which would likely be positioned in the customer’s favour (given that it is their document).

Your position would be strengthened if you have your own T&Cs in place which set out this detail (i.e. if and when a customer can cancel).

Hope this helps

Lawpoint

 

[JEREMY HAWKE]

I agree with @Lawpoint have your T&Cs in place like I do
Payment on booking then we have no problems !

 

[namesweb]

Hi

A Purchase Order can be legally binding - as can emails and calls.

The question is:
• whether or not this had been accepted by the parties and a contract entered into; and
• if a contract had been formed, whether they are entitled to cancel at any time.

The answers would depend on the wording of the Purchase Order, which would likely be positioned in the customer’s favour (given that it is their document).

Your position would be strengthened if you have your own T&Cs in place which set out this detail (i.e. if and when a customer can cancel).

Hope this helps

Lawpoint

Hi Lawpoint,

Amazing thanks for the advice.

Well I've looked through the PO and nothing states in that they would be able to redact the PO until delivery. The organisation it is from isn't incredibly mature, having been in existence for probably 3 or 4 years or so at this point?

Do you have any services available to help us figure out if we have any footing in this matter?

Thanks

 

[namesweb]

I agree with @Lawpoint have your T&Cs in place like I do
Payment on booking then we have no problems !

Thanks Jeremy, good lord yes pro forma payment up front would save us huge headaches with cashflow, we use Bibby for invoice forwarding, which costs us a pretty penny, and we're in an industry with notoriously thin margins, and where suppliers expect pro-forma or max 30 days terms, but customers demand anything between 30-90 days.

 

[Financial-Modeller]

Whilst not legal advice, the background / relationship might have an impact on the likelihood of enforcing the contract.

Is this the first order, or one in a series of identical orders?

What was your response to the PO? Responses could range from nothing, to simple acknowledgement, to issuing an invoice, delivery advice etc with T&Cs attached, in which case it would be more difficult for your customer to suggest that they were not entering into a contract.

 

[eteb3]

My understanding (non-lawyer, so not formal advice) is:

You have a valid and enforceable contract.

By sending the PO they were offering to buy the goods described at the price stated: absent other terms, a PO sent to a supplier is by definition a duly authorised order for purchase.

An offer remains open until it is (i) withdrawn by the offeror or (ii) accepted by the offeree, whichever comes first.

Once the terms of an offer have been accepted in their entirety (ie, you don't say, 'yes but this also'), a valid contract is formed and both are bound: neither your customer nor you can withdraw except by mutual consent, or by a procedure agreed to be integral to the contract (eg, your standard Ts and Cs, or theirs, if either of you have made the other aware of these).

Acceptance of an offer can be oral, written (did you email back and say, Thanks, we'll start work?), or by conduct. In your case, you went ahead and made the goods before they withdrew their offer: that is acceptance of their offer, and binds them into a contract.

NB, even if the offer had been withdrawn at their end, and you had not been adequately notified (eg, their letter was in the post), you would still be able to hold them to it. I also infer that they were to collect - so they can't argue that you're in breach by not delivering (anyway, that would not go to the essence of the contract imo, and Sale of Goods Act is in your favour).

As has been said, you will need to look for other clauses that may give them a right of cancellation (that is cancellation of the now-existent contract, not a withdrawal of their pre-contractual offer, which has been extinguished by the contract).

But on this info, looks like you have a very strong case. You can read more here.

PS you can probably start charging them storage at some point soon. That may encourage them to collect.

 

[JEREMY HAWKE]

Thanks Jeremy, good lord yes pro forma payment up front would save us huge headaches with cashflow, we use Bibby for invoice forwarding, which costs us a pretty penny, and we're in an industry with notoriously thin margins, and where suppliers expect pro-forma or max 30 days terms, but customers demand anything between 30-90 days.

Nobody has any business demanding credit terms from anybody in this uncertain environment !

 

[MBE2017]

Thanks Jeremy, good lord yes pro forma payment up front would save us huge headaches with cashflow, we use Bibby for invoice forwarding, which costs us a pretty penny, and we're in an industry with notoriously thin margins, and where suppliers expect pro-forma or max 30 days terms, but customers demand anything between 30-90 days.

Customers always demand credit, but as the business it’s your job to decide whether to offer it. I used to gain many accounts, but everyone had to trade on pro forma for the first three months. One guy moaned at this, I took him outside and asked whether it said xx wholesalers or XX Bank.

He got the message, and turned into a very good credit client after the three months. Using this method meant I only lost £75 in credit during a previous recession on a turnover at my branch of £1.75 million. My bonus was linked to losses, so I was very hard regarding giving credit.

 

[Deleted member 169416]

Hi namesweb,

You're welcome, and that's lovely to hear that it helped.

We could help via our ad hoc advice 'on account' service, however, you may want to consider if pursuing this is cost effective, as it can mount up and the value of the order may not then mean it is worth it. We always keep a keen eye on our clients costs, unusual for lawyers we think!

We specialise in Terms and Conditions, which moving forward, may help iron out a lot of these types of issues.

Lawpoint