Purchasing and Negotiation Training

Robert Menard, Certified Purchasing Professional, Certified Professional Purchasing Consultant, Certified Green Purchasing Professional

In a very interesting piece on “Lesson 18 Fundamentals Review”, the American Purchasing Society  posits that a PO acknowledgement has two functions.  “One is to confirm the buyer’s offer and the other is to confirm the acceptance of the supplier’s terms and conditions.”  The piece goes on to advise against changes to the “acknowledgment” form of the PO by the supplier.  This is good advice as the piece points to the “battle of the forms” under the UCC. 

This “battle of the forms”  issue is significant and potentially devastating to contracting parties.  The short version of the law involving purchasing is that the “Offeror is the master of the offer”.  This may not sound like much of a statement but the implications of common and statutory law are over whelming for buyers.  

Lesson 18 goes on to state that, “It was traditional for purchase order forms to include an acknowledgment copy that included all the information on the purchase order. It was sent to the supplier with the original front page of the purchase order. The supplier was to sign and return the acknowledgment copy to the buyer. That indicated acceptance of the buyer’s terms and conditions on the purchase order.” 

Troubles arise when the supplier marks up or makes objections, deletions, additions, etc on the buyer’s “acceptance form”.  What is worse, the seller may send its own acceptance form which effectively makes a counter offer and puts the seller in the position of Offeror, a position that the buyer should always occupy. 

Lesson 18 also quite correctly notes that, “To remedy this situation, the Uniform Commercial Code was adopted that facilitated transactions by clarifying when acceptance to the agreement was established for tangible goods. In general, it states that performance by delivery is acceptance even if the terms and conditions are somewhat different unless specifically stated otherwise (For details read Article 2, Part 2, Section 2-206 and Section 2-207 about offers and acceptance.) Because of this law little use is now made of the purchase order acceptance form.” 

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What is left out of Lesson 18 though should be understood by the astute buyer.  Unfortunately, “acceptance” and acknowledgement” do not mean the same thing.  Buyers are well advised, irrespective of the language in the UCC statutes, to use an “acceptance” copy only.  In the digital world, require that sellers send back written acceptance and that no changes can be made.  Better yet, establish a written procedure for acceptance of Purchase Orders in your overall Master Agreement.

Lastly, in a caveat that speaks to unauthorized or maverick purchasing, Lesson 18 quite properly points out that, “Service organizations frequently require signatures on their acceptance forms and non-purchasing employees who are unfamiliar with the law or the buyer’s intended agreement, will unknowingly sign the form – often without reading the terms and conditions. The salesperson will usually put to rest any fear that the employee has by saying something like, don’t worry, it is just a standard form. It is only a standard form with that supplier, and the terms and conditions are only for the benefit of that supplier” 

There is always so much to know in our profession.