A purchase order (PO) is a document a buyer sends to a seller to order goods or services, setting out exactly what is wanted, at what price and on what terms. It is a familiar part of business buying, but it also has legal effect that is worth understanding. Here is a plain-English guide for England and Wales.
What a purchase order does
A PO formalises an order: it tells the supplier what to supply, how much, at what price, where and when, and on what terms. It also gives both sides a clear reference for delivery, invoicing and payment (the supplier quotes the PO number on its invoice).
The legal effect: a PO is usually an "offer"
In contract terms, a purchase order is normally an offer to buy on the buyer's stated terms. A binding contract forms when the seller accepts it, by confirming the order or by starting to perform (e.g. dispatching the goods).
This matters because of the "battle of the forms": if the seller responds with its own terms (for example on an order acknowledgement), those terms may end up governing the contract. The general rule is that the last set of terms sent and not objected to before performance tends to prevail. To make your terms apply, state on the PO that the order is placed on your purchase terms and conditions (and attach or reference them).
What information should be on a purchase order?
A good PO includes:
- Buyer and supplier details, names and addresses;
- PO number and date, for tracking and invoicing;
- Description of goods/services, clear specification, part numbers, quantities;
- Price, unit price, totals, currency, and whether VAT is added;
- Delivery, delivery address, required date, and delivery terms (e.g. Incoterms® for goods);
- Payment terms, when and how payment is due;
- Terms and conditions, a statement that the order is on the buyer's standard purchase terms (attached/linked);
- Authorisation, the name and signature of an authorised person.
VAT, late payment and company disclosures
- VAT: the PO is not a VAT invoice, the supplier must issue a proper VAT invoice; but stating expected VAT helps avoid disputes.
- Late payment: for business-to-business orders, overdue payment can attract statutory interest and compensation under the Late Payment of Commercial Debts (Interest) Act 1998, your terms can reflect this.
- Trading disclosures: companies must show certain details (company name, number, registered office) on business documents and websites under the Companies Act 2006, make sure your PO/stationery complies.
Practical tips
- Use sequential PO numbers and match them to invoices and deliveries (the "three-way match": PO, delivery note, invoice).
- Reference your terms clearly to win the "battle of the forms".
- Keep POs accurate, errors in quantity or price cause disputes and delays.
- Set up an authorisation process so only approved people commit the business.
Key takeaways
- A purchase order is the buyer's order to a seller; legally it is usually an offer to buy, accepted when the seller confirms or performs.
- Watch the "battle of the forms", state that the order is on your terms to make them govern.
- Include parties, PO number/date, clear description, price/VAT, delivery, payment terms, your T&Cs and authorisation.
- Remember VAT invoicing, late-payment rights (B2B) and Companies Act trading disclosures.
Sources
- General law of contract (offer and acceptance; the "battle of the forms")
- Late Payment of Commercial Debts (Interest) Act 1998 (statutory interest/compensation on B2B debts)
- Companies Act 2006 (trading disclosures on business documents); VAT invoicing rules
--- This article is general information about the law of England & Wales as at 2026, not legal advice. For advice on your circumstances, consult a qualified solicitor.