WHAT IS DIFFERENCE
BETWEEN A PO & CONTRACT
WHAT IS DIFFERENCE
BETWEEN A PO & CONTRACT?
• A Contract is a mutual agreement between
contracting parties that contains the
essential elements of a contract
• A PO is normally only considered an offer
to purchase something when issued; it
becomes a contract when the Vendor :
– issues an acknowledgement accepting the
PO’s T’s & C’s without changes; or,
– ships the goods or provides services in
accordance with the PO.
WHAT IS DIFFERENCE
BETWEEN A PO & CONTRACT
(Cont’d)?
• PO’s are normally used to purchase
goods.
• Contracts are normally used to purchase
services.
• Make sure a contract is executed when
needed (i.e. reduce risk exposure, identify
responsibilities, define performance
standards, remedies and expectations,
etc.).
WHAT IS DIFFERENCE
BETWEEN A PO & CONTRACT
(Cont’d)?
• Texas State does use PO’s to purchase
some services without executing a
separate contract.
• If used without a contract, need to
determine University’s risk exposure.
• May need to add additional terms &
conditions to the PO’s standard T’s & C’s
boilerplate to address identified risks or
other contract issues.
WHAT IS DIFFERENCE
BETWEEN A PO & CONTRACT
(Cont’d)?
• Purchases of goods are governed by the
Uniform Commercial Code (UCC) (e.g.
“Law of Merchants”) as adopted by the
State of Texas.
• If a PO is used and issues arise that are
not addressed in the PO’s T’s & C’s, or the
Seller’s and Buyer’s T&C’s conflict (i.e.
"Battle of the forms”), if taken to litigation
the UCC will normally apply.
WHAT IS DIFFERENCE
BETWEEN A PO & CONTRACT
(Cont’d)?
• Services are governed by the contract’s
T’s & C’s (e.g. “within the 4 corners of the
document”) which have been previously
mutually agreed upon by the contracting
parties.
• If a contract is used to purchase services
and issues arise, previous court cases and
rulings (e.g. Common Law) will normally
apply if taken to litigation.
WHAT IS DIFFERENCE
BETWEEN A PO & CONTRACT
(Cont’d)?
• PO’s are usually of a short term (e.g.
usually less than one year) or of a onetime nature.
• Contracts may be of a long term (i.e. more
than one year) and may include multiple
renewal options.
WHAT IS DIFFERENCE
BETWEEN A PO & CONTRACT
(Cont’d)?
• PO T’s & C’s are generally written to
modify parts of the UCC that tend to favor
the Vendor over the Buyer.
• Contract T’s & C’s are usually much more
detailed including setting out scope of
work, communication and change
management plans, deliverables,
contingencies and performance standards
and remedies, etc.,.
WHAT IS DIFFERENCE
BETWEEN A PO & CONTRACT
(Cont’d)?
• At Texas State a PO is used to commit or
encumber funds to pay for purchases.
• It is strongly recommended that a
requisition be created and a PO be issued
referring to the contract in order to commit
funds to pay for the contracted goods or
services within the current fiscal year.