There are five basic requirements for a contract to exist between two parties: agreement, voluntary, consideration, capacity, and legality. A sixth requirement of "in writing" sometimes applies.
The main concern for commercial orders is that there must be agreement (offer and acceptance) for the order to be a contract. Prior to this, businesses often record the details of negotiations by using a request for quotation, request for bid, sales quotation, or sales bid. Quotations are non-binding and part of the negotiation process. A request for bid can be binding or non-binding, depending on the terms of the bid.
Once an agreement or contract is in place, businesses record these as confirmed purchase orders and confirmed sales orders.
|Commerce||Buyer's Action||Seller's Action|
|Buyer wanting the product and seller selling the product||Search for vendors (sellers) of the product||Marketing and advertising|
|Check product pricing, availability, specifications, delivery costs||Request for Quotation or Request for Bid||Sales quote or bid created|
|Buyer and seller agree to transaction||Purchase order recorded||Sales order recorded|
|Product is shipped from seller to buyer||Packing slip, pro forma invoice for certain international shipments|
|Buyer receives product from seller||Packing slip and product is checked with purchase order; product is checked for good condition|
|Seller sends invoice to buyer||Match packing slip with purchase order and invoice; record purchase in financial accounts under accounts payable||Record sales in financial accounts under accounts receivable|
|Buyer pays seller||Pay by cash, check or electronic payment; record payment on purchase order||Receive cash, check or electronic payment; record payment on sales order|
(1) In this Article unless the context otherwise requires "contract" and "agreement" are limited to those relating to the present or future sale of goods. "Contract for sale" includes both a present sale of goods and a contract to sell goods at a future time. A "sale" consists in the passing of title from the seller to the buyer for a price (Section 2-401). A "present sale" means a sale which is accomplished by the making of the contract.
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