How to Review Purchase Order Terms: A Clause-by-Clause Checklist

How do you review purchase order terms? Review purchase order terms by reading them clause by clause against a checklist, and by asking one question of each clause: whose terms actually govern this deal, and what happens if the goods are late, wrong or defective? Purchase order terms are rarely neutral. They are drafted by one side, usually the buyer, to protect that side, so the review depends on whether you are the buyer issuing them or the supplier receiving them. This checklist walks through each clause in the order it usually appears, with the red flags to catch, and notes for buyer and supplier where their interests differ. This is general information, not legal advice. For high-value or regulated purchasing, have a lawyer review the terms before you rely on them. ## 1. Acceptance and the battle of the forms - Does it say when the order is accepted (on written acknowledgement or on starting work)?

• Does it state which terms govern if the buyer's and supplier's terms conflict? Red flag (supplier): terms that say the buyer's conditions prevail over anything in your quotation or acknowledgement, with no room for yours. Red flag (buyer): no acceptance clause at all, so the supplier's terms, sent last, could win the "battle of the forms". ## 2. Price - Is the price fixed, and is it clear whether it includes taxes such as GST or VAT?
• Are extra charges blocked unless agreed in writing before delivery? Red flag (buyer): a term letting the supplier add charges or raise the price after the order. Red flag (supplier): a fixed price with no adjustment for a long-running order and volatile input costs. ## 3. Delivery and time - Is the delivery date and location clear?
• Is "time of the essence" stated, and are you comfortable with what that means? Red flag (supplier): "time is of the essence" combined with penalties, which turns a small delay into a serious breach. Red flag (buyer): no firm delivery date, so a late supplier faces no real consequence. ## 4. Quantity, packaging and inspection - Must the exact quantity be delivered, properly packed and labelled?
• Is there an inspection window, with a right to reject non-conforming goods?
• Does it say payment does not imply acceptance? Red flag (buyer): no inspection or rejection right, so you are stuck with whatever arrives. Red flag (supplier): an open-ended inspection window that lets the buyer reject goods long after delivery. ## 5. Title and risk - Is it clear when risk (loss or damage) passes and when title (ownership) passes?
• Do the two line up with how delivery actually happens? Red flag: a gap where the buyer bears risk long before owning the goods, or the supplier keeps title long after payment. Either side can be left exposed to a loss nobody clearly owns. ## 6. Payment - Are payment terms and the due date clear, tied to acceptance or invoice?
• Must invoices quote the PO number to be valid? Red flag (supplier): long payment terms, such as 60 or 90 days, with no late-payment interest. Red flag (buyer): payment due on invoice regardless of whether the goods were accepted. ## 7. Warranty - Does the supplier warrant conformity, quality, fitness for purpose, legal compliance and non-infringement, for a stated period? Red flag (supplier): a very broad or long warranty, especially fitness for a purpose the buyer never told you about. Red flag (buyer): no warranty beyond the legal defaults, which vary by jurisdiction and may be weaker than you expect. ## 8. Intellectual property - If anything is made specifically for the buyer, does ownership pass to the buyer on payment?
• Is there a licence for pre-existing materials needed to use the deliverables? Red flag (supplier): a clause assigning your general tools and know-how, not just the bespoke deliverable. Red flag (buyer): no assignment, so you may not own what you paid to have made. ## 9. Compliance and confidentiality - Does the supplier agree to follow applicable laws (product safety, data protection, anti-bribery, labour and environmental where relevant)?
• Is confidential information protected and used only for the order? Red flag: silence on compliance for regulated goods, which leaves the buyer exposed to a supplier's breach of law. ## 10. Indemnity and liability - Does the supplier indemnify the buyer for defective goods and IP infringement?
• Is liability capped anywhere, and if so, how does the cap sit against the indemnity? Red flag (supplier): a broad, uncapped indemnity that makes you cover losses far larger than the order value. This is the clause to fix first. Red flag (buyer): a liability cap so low it is meaningless if defective goods cause real harm. ## 11. Termination and cancellation - Can the buyer cancel before delivery, and exit immediately for breach or insolvency?
• Does the buyer pay for conforming goods already delivered? Red flag (supplier): a right for the buyer to cancel at any time with no payment for work in progress or committed materials. ## 12. Governing law and disputes - Is the governing law stated, and is the forum (court or arbitration) one you can realistically use? Red flag: disputes sent to a distant jurisdiction, which makes any claim too costly to pursue. ## A fast triage If you only have ten minutes, read three things: the acceptance clause (clause 1, which decides whose terms govern), the inspection and title clauses (clauses 4 and 5, which decide who bears a defect or a loss), and the indemnity and liability clause (clause 10, which decides how big the exposure can get). Most of the risk lives there. ## Where a contract workspace helps On your own, this checklist reviews purchase order terms properly. The harder part is doing it for every order the same way, and spotting when a supplier's acknowledgement quietly adds conflicting terms that could override yours. What helps is reviewing, comparing and tracking purchase orders and supplier responses in one AI workspace tuned to how your company buys, so conflicting terms and the delivery and payment dates show up in one place. Adira is one tool of that kind.