Purchase Order and Order Confirmation in Export Sales

Purchase order and order confirmation explained: what each contains, when the export contract is formed, the battle of forms under the CISG, how to check a PO.

For many exporters, especially those selling to distributors, retailers and industrial buyers, the order does not arrive as a contract to negotiate but as a purchase order: a numbered form generated by the buyer's purchasing system, with the buyer's general conditions attached. Your answer — the order confirmation — decides whether those conditions become the contract, and the PO number becomes the key that the buyer's accounts department will use to pay you.

This lesson explains what a purchase order and an order confirmation are, what each should contain, when the contract is formed and on whose terms, and how to check a PO before you confirm it. A worked example shows a typical exchange between an Algerian food exporter and a Spanish importer, with the differences that had to be cleared before shipment.

What is a purchase order?

A purchase order (PO) is a document issued by the buyer to order goods on stated terms: what, how many, at what price, delivered how and when, paid how. It serves the buyer internally (budget approval, receiving, invoice matching) and externally as the legal expression of its will to buy.

Its legal role depends on the sequence. If you sent a quotation or proforma invoice and the buyer's PO accepts it without changes, the PO is the acceptance and the contract is formed. If no firm offer preceded it, the PO is itself the offer, and you accept it by confirming.

What is an order confirmation?

The order confirmation (also called sales order confirmation or order acknowledgement) is the seller's reply. It should restate the essential terms, refer to the PO number and say clearly whether you accept the order. A message that only says 'order received' is an acknowledgement, not an acceptance; buyers and sellers who mix up the two later argue about whether a contract exists.

What should a purchase order contain?

Your confirmation should mirror these fields, add your own references (production order, shipment reference) and state which general conditions apply.

When is the contract formed? Offer, acceptance and the battle of forms

Under the CISG, which governs many international sales of goods:

• a proposal is an offer if it is addressed to specific persons, indicates the goods and fixes or provides for quantity and price (article 14);
• acceptance can be a statement or conduct, such as dispatching the goods or paying; silence or inactivity alone is not acceptance (article 18);
• a reply that purports to accept but contains additions or changes is a rejection and a counter-offer (article 19(1));
• if the changes are not material and the offeror does not object promptly, the contract is formed on the offer as modified (article 19(2));
• changes relating to price, payment, quality and quantity, place and time of delivery, extent of liability or settlement of disputes are considered material (article 19(3)).

When each party sends its own standard terms and both then perform, you have a 'battle of the forms'. Courts in different countries resolve it differently: some apply the last terms sent before performance, others keep only the terms that agree and strike out the conflicting ones. The only safe answer is to resolve conflicts expressly before production. The wider legal framework is covered in the CISG and choice of law.

Worked example: couscous to Valencia

A Spanish importer sends a PO to an Algerian semolina and couscous producer after receiving a quotation.

The confirmation changes quantity tolerance, delivery, payment and the applicable conditions — all material terms. It is a counter-offer. The exporter does not order the private-label cartons until the buyer replies by e-mail: week 18 accepted, payment 60 days from bill of lading date agreed, penalties limited to 1% per week with a 5% cap, disputes to arbitration. Both sign an amended confirmation that becomes the contract; for a regular flow of such orders, the two companies later sign a framework sales contract so that each new PO only carries quantities, prices and dates.

How to check a purchase order before confirming it

1. Compare items, quantities, prices and currency with your quotation or proforma.
2. Check the Incoterm and named place: is it the one you quoted, and does it suit the transport? An FCA term at a terminal is not the same cost as FCA at your factory.
3. Check whether the requested date is a shipment date or an arrival date, and whether you can meet it.
4. Check payment terms against your credit limit for this buyer and your security (insurance, guarantee). See open account for how to protect credit sales.
5. Read the buyer's documents and labelling requirements: certificates, label language, barcodes, pallet types.
6. Read the attached purchasing conditions: penalties, warranty length, liability, audit rights, law and courts.
7. Confirm in writing, listing the differences, and do not start performance until they are settled.

The PO number on the other documents

Once the order is confirmed, the PO number becomes a mandatory reference. Large buyers pay through a 'three-way match': their system compares the PO, the goods receipt and your invoice, and blocks payment if the PO number is missing or the quantities or prices differ. Put the PO number on the commercial invoice, the packing list and the shipping marks if the buyer asks, and use the same item descriptions and units as the PO. When payment is by letter of credit, the credit often quotes the PO or contract number and requires it on the invoice.

Common mistakes

• Treating an acknowledgement e-mail as a confirmed order and starting production.
• Confirming 'as per your PO' without reading the conditions on the back.
• Accepting an arrival date under a term like FCA, where you control only the hand-over to the carrier.
• Different units on the PO and the invoice (cartons on one, kilograms on the other), which block the buyer's matching.
• Changing quantities or dates by telephone without an amended PO or confirmation.
• Missing the PO number on the invoice, delaying payment by weeks.

Putting it into practice

On Incoforms, you can record the buyer's order and generate a purchase order or order confirmation from the shipment's data — parties, goods with HS codes, quantities, prices, Incoterm and ports — numbered from the shipment reference. The same data then feeds the proforma, commercial invoice and packing list, so the references and units the buyer will match stay identical across documents.