What Contractors and Vendors Should Know About Construction Purchase Orders

By AIA Contract Documents

November 8, 2022

Purchase order forms on both commercial and residential construction projects often have brief terms. Sometimes, these forms only include the vendor’s and purchasing party’s names, item description, quantity, price, and payment terms. Though this brevity may seem appealing, if you’re using this type of form, you may be exposed to risk that are beyond the terms of the document.

If you’re using an overly simple purchase order, you could be subject to terms and conditions that are beyond what is written in the document. When it comes to transactions involving the sale of goods, if your purchase order or other written agreement does not address certain issues, the law may supply default terms to fill in that gap. For instance, if your purchase order does not address topics such as (i) when title (and the risk of loss) transfers, (ii) what constitutes acceptance of the goods, or (iii) the applicable warranty, the law may supply default terms that govern if an issue arises with respect to these topics. This law is known as the Uniform Commercial Code or UCC. The UCC applies to contracts for the sale of goods to or by a merchant, and it does not apply to contracts that are purely for services.

If the parties specifically include these types of topics in the purchase order, then they may control how that issue is handled by avoiding default terms imposed by the UCC on the transaction. These default terms may or may not be favorable to your position on a relevant issue, such as when the warranty commences or expires, or when the risk of loss transferred from the vendor to the purchaser. If the parties wisely, and with the correct language for their jurisdiction, address these topics in their agreement, they may modify the UCC’s default terms in the written contract.

It should be noted, however, that not all legally imposed terms can be modified in any capacity in a written agreement. For instance, in most jurisdictions, the statute of limitation or statute of repose have particular limitations about how they may be modified in written contracts. These statutes govern the time frame in which a party may sue or bring a claim after a dispute arises or an issue becomes known.

AIA Contract Documents have developed a standard purchase order agreement that is intended for situations where a purchaser will buy goods from a vendor. The A152TM-2019, Purchase Order is an agreement for the sale of goods, and can be used to buy nearly any kind of good. Fundamentally, this standardized purchase order allows the parties to consider terms that best suit their needs, and to modify conditions that may otherwise imposed on their transaction by way of the UCC.

AIA Contract Documents has provided this article for general informational purposes only. The information provided is not legal opinion or legal advice and does not create an attorney-client relationship of any kind. This article is also not intended to provide guidance as to how project parties should interpret their specific contracts or resolve contract disputes, as those decisions will need to be made in consultation with legal counsel, insurance counsel, and other professionals, and based upon a multitude of factors.