Master contracts and master contract orders are two important concepts in purchasing management – especially common in FMCG, construction, logistics, or when there is a long-term cooperation between a business and a supplier.
This article by Bizzi will help you have a more specific view of the principle contract order form, and also provide completely free downloadable documents.
What is a contract for the sale of goods?
Currently, the law does not set out specific regulations on the principle contract in the sale and purchase of goods. However, the principle contract can be understood as a contract signed between the buyer and seller to agree on the basic contents of the sale and purchase transaction (framework content).
A contract in principle is often signed before a transaction is made when the goods and services are in large quantities and the buyer is not completely sure or are subject to frequent changes over a certain period of time.
The difference is that this contract does not specifically agree on the quantity of goods and price, but this content will be specifically agreed upon for each subsequent order. Specific orders will be based on this principle contract for implementation.
What are the conditions for a contract in principle to be valid?
- The subjects participating in the contract must have civil legal capacity and civil conduct capacity in accordance with the contract when it is established.
- The parties participating in the contract must be completely voluntary.
- The purpose and content of the contract do not violate the prohibitions of law and are not contrary to social ethics.
- The form of the contract must comply with the provisions of law.
What are the basic contents of a Principle Contract usually included?
- The parties have the right to agree on the content of the contract.
- Usually includes: Subject of the contract; Quantity, quality; Basic information about goods and services (name, unit).
- Price, payment method (provisional value, account number, method).
- Term, location, method of contract performance.
- Rights and obligations of the parties.
- Liability for breach of contract.
- Dispute resolution method.
- Product warranty (if any), method of suspension, stoppage, termination, cancellation of contract, general commitments, contract validity.
- May include terms on shipping method, shipping costs, quality of goods, penalties for late progress, late payment.
Legal value of the Principle Contract
- The principle contract has the same legal value as the economic contract in civil, business and commercial transactions.
- The signing of the contract is for guidance purposes only. The parties will agree on more details in the economic contract or add an appendix.
- A contract in principle can replace a formal contract in cases where the parties cannot determine a specific volume of goods or services or to avoid having to sign multiple other contracts within a fixed period of time.
- In case of disputes arising during the official contract negotiations, the parties may rely on the principles expressed in the signed principle contract to resolve them.
Sample order form according to principle contract
A master contract order form is a specific order sent by the buyer to the seller based on the terms agreed upon in the master contract. It is an important tool that plays the role of:
- Specify the requirements, conditions and commitments of both parties involved in the transaction.
- Helps the buyer describe the product or service in detail, along with terms of price, quantity, delivery time and other special requirements.
- Provide accurate information to the seller to confirm and accept the terms agreed upon in the contract.
With transparency and clarity, the principle contract order form creates a solid legal basis, minimizing legal risks and future disputes. At the same time, it demonstrates professionalism and respect for business partners, strengthening and developing long-term business relationships.
- Example of a principle contract order request:
A cosmetics company signs a contract in principle with a packaging factory, committing to purchase 100,000 boxes per year.
- January: sent order produce 10,000 boxes according to model A
- March: send another order of 15,000 boxes of sample B
Each order complies with the price - delivery time - specifications stated in the principle contract.
- Free Download here
When to use a principle contract order form?
- Used when both parties have signed a contract in principle and need to execute a specific order according to the terms of this contract.
- Often applied to long-term supply contracts, such as the supply of production materials, consumer goods, technical services, or periodic maintenance and repair services.
- Used for recurring or replenishment orders, subject to the terms agreed upon in the master contract.
Basic content of the Purchase Order form according to the principle contract
- Name of seller, buyer.
- Important information about the item: serial number, item name, quantity, unit price, currency, and corresponding total amount.
- Delivery time and conditions: need to clearly state the time and location (alley, alley, house number) so that the delivery party can deliver accurately and completely. Delivery time is agreed upon by both parties..
- Payment terms and payment time: The parties can negotiate to ensure their rights.
- Signature of seller and buyer.
What are the principles to note when creating a contract order form?
When creating a purchase order form according to a contract in principle, businesses need to ensure a number of legal, professional and internal management factors to avoid errors, disputes and ensure good control of arising orders. Below are important notes:
- Information must be fully, detailed and accurate in terms of content, unit price, quantity, total amount, location and delivery time to avoid confusion.
- The more detailed the information, the better for the seller to respond accurately and completely.
- Parties should draw up a sales contract or purchase order clause that includes provisions for breach of quantity, defective goods and late delivery.
- The order must be made in 2 copies and the supplier must sign and confirm receipt to ensure the rights of both parties.
- Orders must comply with the terms of price, delivery time, and payment method specified in the principle contract.
Applying technology to manage and optimize ordering costs most effectively
Managing orders according to principle contracts often comes with a large volume of documents: PO (Purchase Order), input invoices, delivery notes, warehouse receipts, etc. If businesses still process manually, it is very easy to encounter incorrect information, lost documents, late payment or being fined for incorrect declaration.
Bizzi provides technological solutions with breakthroughs in process control, serving as an effective financial management assistant for the accounting department.
Automatic reconciliation of PO – GR – Invoice
- The system will automatically compare data between purchase order (PO), delivery receipt (GR) and electronic invoice.
- As soon as there is a discrepancy in quantity, unit price, or delivery time, the system will alert the accounting or purchasing department.
- Significantly reduce manual review time, reducing errors that can lead to payment rejections or disputes.
Manage spending and debt in real time
- Based on the flow of orders generated, businesses can track used budgets, spending warning thresholds, expected cash flow to be paid, etc.
- This feature is especially important in implementing long-term principle contracts with suppliers – where the commitment value is often large and spread over many periods.
Centralized electronic invoice management
- All invoices related to orders are stored, categorized and tagged by PO for easy retrieval.
- Helps accountants and finance easily compare documents when it comes to auditing or tax reporting.
Increase transparency, ensure compliance with regulations on electronic invoice storage.
Conclude
A standard contract purchase order form is an essential tool to standardize and make sales transactions transparent, especially in long-term and dynamic partnerships.
Applying technology solutions such as Bizzi with features such as automatic invoice reconciliation - PO - GR, expense and debt management, along with electronic invoices, will help businesses manage more effectively, minimize errors, save time and optimize financial processes in executing orders based on principle contracts.
Register here to discover the solutions Bizzi offers and don't forget to schedule an appointment to receive more specific advice from experts:
- Link to register for a trial of Bizzi products: https://bizzi.vn/dang-ky-dung-thu/
- Schedule a demo: https://bizzi.vn/dat-lich-demo/
