Incoterms & trade contracts PO

Purchase order

The formal order a buyer sends to a supplier stating the product, specification, quantity, price, delivery date, delivery term and payment conditions. Once the seller confirms it in writing (order confirmation), a binding contract exists between the parties. The PO number is quoted on invoices, delivery notes and shipping documents and makes reconciliation easier.

Related terms

Proforma invoice PI

A preliminary invoice issued by the seller before shipment, listing the product, quantity, unit price, Incoterm, payment terms, delivery time and bank details. Buyers use it to open a letter of credit, pay an advance or apply for import licences or foreign-exchange allocation. It is not a tax invoice; once countersigned by the buyer it can serve as the contract in simple deals, but larger transactions deserve a full sales contract.

Sales contract

The core document setting out the parties’ rights and obligations in an international raw material sale. It should cover the product and specification, quantity and tolerance, price and currency, Incoterm and named place, shipment period, payment method, quality and quantity determination (inspection), insurance, force majeure, remedies for breach, governing law and dispute resolution. Where the parties’ countries allow it, the UN Convention on Contracts for the International Sale of Goods (CISG) applies unless expressly excluded.

Request for quotation (RFQ)

A document in which a buyer asks suppliers for prices, stating the material, specification, quantity, delivery place, Incoterm, payment terms and required delivery date. A good RFQ also sets the acceptable quality range, required documents (COA, TDS, certificates), packaging and how long offers must remain valid, so that offers can be compared like for like. On the marketplace, published buying requests are sent to verified suppliers in the relevant category.

Explained in the trade handbook

Trade handbook