Legal Question in Business Law in California

Re: Payment of a Purchase Order

Assuming that your purchaser did not advise you of the "mistake" in the price until after you fulfilled the purchase order and shipped the goods, the question becomes whether there was some reason you should have suspected that the price was incorrect before you filled the order. For example, if the price on the new purchase order was ten times the price of the prior order, you would be on notice that the price was in error. However, if the price on the new order was the same, or only slightly different, from the prior order, you would not be in the absence of other evidence.

You should consult with an attorney as to how to proceed in either negotiating a resolution or filing a lawsuit if it comes to that.

Re: Payment of a Purchase Order

Purchase orders are usually construed to be offers to enter into a contract. Your acceptance of the order turns it into a contract.

Since you've already shipped the goods, you've clearly accpeted the order. It's now a contract.

The terms of the purchase order become the terms of the contract unless you had reason to know that they were offered in error. That is, if you're charging $15.50 for each widget, and the PO said $155.00, that looks like an obvious error, and there would be no meeting of the minds. Also check if the price they put in their PO was for a higher grade of widget. If you sent a lower grade of widget knowing that they paid for the higher grade one, you should recognize this error and refund the difference. If, however, you believe the price term was correct, and they now just want to renegotiate the deal, then you can insist on the precise terms of the contract.

An important question to ask is: when did this company first tell you that the PO was incorrect? If it was only after you shipped the goods, then it is of little effect. If it was before you shipped the goods, then your shipment might have consented to a modification of the price term.

If you think you did not consent to a modification of the price term, you can maintain an action for price. That means, you sue the purchaser for the full value of the contract.

Before you do that, however, consider whether you want this purchaser's business in the future. Your lawsuit probably means the end of the commercial relationship. If this is a valued customer, you might consider negotiating or cutting them a deal.

If there is any significant amount of money at stake here, you should probably consult an attorney before taking any action or making any statements.

Good luck.

Re: Payment of a Purchase Order

Mr. Meyer's analysis is absolutely correct and quite complete. The price on the purchase order is strong evidence of the parties' agreement, but can possibly be rebutted by a showing that it was a mistake and that the fact that it was a mistake should have been obvious to you. The general principle is that contracts are formed, and their terms set, by the parties' actual agreement or intent at the time the contract was made, and that things like POs, written contracts and price lists are evidence of the agreement, but it is always possible that some other evidence exists which shows a different intent.