Is an Order Form a Contract?

Published: | By POWR

Running a business often involves legal documents and contracts, each of which serves a different purpose. An order form is usually an inevitable document for businesses involved in procurement, sales, and large-scale purchases. Thankfully, business owners can use an order form app like POWR for more efficient management of orders.

With so much emphasis on order forms, it is natural to wonder what an order form is and if it can constitute a legally binding contract.

What Is an Order Form?

An order form, or business order form, is used to request a product or service. It contains the specific details of one or more business transactions between a buyer and a seller. It usually involves a buyer filling out a request for goods or services from the seller. However, many government agencies also use order forms to negotiate deals with private companies.

Buyers use purchase order forms to place orders for products from a seller, specify how many of each product they want, communicate payment terms, and document purchases. In most cases, orders made through forms are prepaid as soon as the order is accepted by the seller.

What Is a Contract?

A contract is a blanket term used to describe a legally binding agreement between two or more parties. Documents can pass as contracts only when they spell out the terms of the agreement including the value of a product or service, the duration of the agreement, and a legal obligation to complete a task.

Is an Order Form a Contract?

An order form becomes a legally binding contract only after the seller accepts the order. When both parties sign the order form, they are bound by the terms of the agreement. This means that the seller agrees (by signing the order form) to deliver or produce the product specified in the form, and the buyer is legally obligated to submit the agreed payment for the product or service.

For an order form to be considered a legal contract, it must contain at least the contact information for the buyer and seller, a description identifying the product requested, the quantity of product requested, the cost per unit, the total cost, the terms of payment, and the signatures of the buyer and seller.

However, it is important to know that by itself, an order form does not qualify or create a contractual agreement. The document can only pass as a contract only after the seller accepts the purchase order. This is because there must be an offer and the offer must be accepted before any contract is created. 

What to Know About Contractual Agreements Using Order Forms

When a seller receives an order form, they have the opportunity to accept or reject the offer. If the seller accepts and fulfills the request of the buyer without making adjustments to the order, it is called an acceptance. However, if the seller accepts the order but makes changes and sends back an invoice to the buyer, there may be some back-and-forth negotiating that ensures. 

According to the Uniform Commercial Code, a contract can be created in both scenarios. A contract can still be created even if the two forms do not have the same exact details. The additional terms or changes are considered to be part of the contract unless rejected by a party or if the new terms materially alter the originally proposed agreement.

To simplify the process of creating and filling out an order form, many businesses have digitized the process and use e-signature software for the contract agreement. This means many businesses can now create, customize, send, and sign purchase order forms without needing to print a single document.

E-order forms can be customized, too, saving time on both ends. POWR is a superior platform that businesses can leverage to create efficient, top-quality order forms. It simplifies how to set up an online order form for any business owner.

What Is the Purpose of an Order Form?

Any business involved in procurement, sales, large orders, or high-value transactions will be required to use order forms. For sellers, order forms are necessary for documenting business orders, managing inventory purchases, and pairing shipments with purchases for auditing or bookkeeping. 

For buyers, order forms can be used for account record-keeping, tracking arrival and payment of goods, better control over the procurement process, ensuring delivery of orders, and managing incoming and pending orders. After an order is agreed to by both parties, it serves as the contractual agreement to fulfill and accept the order.

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