2 WHAT IS DIFFERENCE BETWEEN A PO & CONTRACT? A Contract is a mutual agreement between contracting parties that contains the essential elements of a contractA 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.
3 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.).
4 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.
5 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.
6 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.
7 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 one-time nature.Contracts may be of a long term (i.e. more than one year) and may include multiple renewal options.
8 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.,.
9 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.