Purchase Orders – Contract Tip of the Week

Q: We’re working with a new client who requested that we use a purchase order as our form of agreement. Would you have concerns about that approach?

A:  Purchase orders are sometimes employed due to a client’s accounting procedures or system workflows. Since purchase orders are typically used for a variety of services and products, the terminology can include provisions that won’t necessarily apply to your responsibilities and may pose issues with insurability. For example, purchase orders often contain warranties or guarantees. These warranties and guarantees may go beyond the normal standard of care required in performing professional services. If they obligate you for damages beyond those that are proximately caused by your negligence, you may be creating uninsurable obligations.

The Risk Specialty Group and RLI Design Professionals are pleased to feature a new series—our Contract Tip of the Week. Each week, we’ll review a question submitted by a design firm relating to the subject of contracts. Keep in mind, though, that these discussions are general in nature and in making specific business decisions, it’s important to review your options with a knowledgeable attorney.