Compliance and Legality

Purchasing contracts usually consist of a statement acknowledging the nature of the order in precise and descriptive terms. Purchase orders are typically issued to suppliers in response to quotes or requests for services or products. In terms of commercial purchasing, a typical agreement consists of a description of the product or service offered by the seller, followed by a statement of acceptance on the part of the buyer. These constitute offer and acceptance (consensus ad idem), i.e. the essential components of a legally binding contract and the fundamental proof of the contract’s existence (the written contract represents documentary evidence and a formal record of both parties’ original intention to transact).

Contracts need not necessarily be written or as formal as these criteria suggest. Verbal contract are also valid. Whether formal or informal, contracts have to be voluntarily entered into, i.e. agreed upon without duress, and their terms and conditions must be compliant with criminal and civil legality and public policy. Service level agreements and other measures of performance may be incorporated, especially into contracts that concern corporate interdependency and performance critical products and services. Such contracts are necessarily technical in nature. Their contents must be fully understood, acknowledged, and accepted; and the legality of any devices, services, and substances confirmed. Contracts that enforce provision of illegal devices, substances or services are statutorily invalid. Minor mistakes are permissible, but wilful misrepresentation is grounds for invalidation. Contract terms can be explicitly stated or implied. Explicit terms are statements that are formally offered and accepted by the selling and buying parties respectively. Implied terms cover rational conditions that are not stated but rational or reasonable, for example: goods cannot be returned if the buying party cannot take possession of them due to lack of warehouse space. The seller has provided goods according to requirement, so is due payment. Denial of payment by the buyer on any grounds other than those explicitly stated or rationally implied would be unjust.

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