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 one-time 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.