Checklist · Commercial

Drafting and Reviewing a Purchase Order and Terms of Sale: A Practical Checklist

15 U.S.C. §§ 2301

Type
Checklist
Jurisdiction
National
Date
2025-04-06
Topic
Commercial

A drafting and review checklist for the documents that actually form most commercial sales contracts, built so both the buyer-side and seller-side versions can be worked from the same sequence. Phases one through four establish the framework: determining whether Article 2, the CISG, or common law governs, choosing between a form-based exchange and a signed master agreement, fixing the commercial terms on the face of the document, and installing the formation controls that decide the battle of the forms. Phases five through nine are where the money is: the incoming confirmation protocol with its ten-day objection window, controlling the express warranties that sales literature and specifications create and cannot be disclaimed, drafting the warranty itself, drafting an implied warranty disclaimer that is conspicuous and mentions merchantability, and drafting a remedy limitation that survives failure of its essential purpose. Phases ten through seventeen cover delivery and risk, inspection and rejection procedures, price and payment and credit support, force majeure with allocation, assurance and termination, infringement indemnity, compliance clauses, and dispute resolution including the limitations period. Phase eighteen sets out the operational protocol the purchasing and sales organizations must actually follow.

Drafting and Reviewing a Purchase Order and Terms of Sale: A Practical Checklist

Commercial > Sale of Goods | Published 6 April 2025 - Updated 19 July 2026 | UpLaw - uplaw.us

Most commercial sales contracts consist of four agreed terms and two sets of unread boilerplate that contradict each other. Section 2-207 then decides which boilerplate survives, and the usual answer is neither. A seller that wants a warranty disclaimer and a damages cap cannot get them from a form. It gets them from a signed agreement, or it does not get them.

Keywords: § 2-207, expressly conditional, merchant confirmation, express warranty control, conspicuous disclaimer, § 2-719, Incoterms, risk of loss, § 2-607(3)(a) notice, § 2-609 assurance, § 2-725

Work this in order. Each phase has a buyer-side and seller-side version; run both, because the counterparty is running the other one. The doctrinal treatment is in Sales of Goods Under UCC Article 2: A Comprehensive Guide to Formation, Warranties, and Remedies. The narrative overview is The Battle of the Forms and Other Everyday Disasters Under UCC Article 2.

Our running example. Kestrel Foods, Inc. (fictional) buys industrial equipment and ingredients. Aldergrove Machine Works, LLC (fictional) sells the equipment. Both use forms.

Phase 1 — Determine the governing law

  • [ ] Confirm the transaction is a sale of goods under U.C.C. § 2-105 — movable things at the time of identification.
  • [ ] For a hybrid contract (goods plus installation, configuration, or support), apply the predominant purpose test and note the answer governs the entire contract in most states.
  • [ ] For software, determine whether it is embedded (goods), delivered on media (contested), or provided as a service (generally not goods) — and draft the warranty and remedy terms expressly rather than relying on defaults.
  • [ ] For cross-border transactions, determine whether the CISG applies (both parties in contracting states, sale of goods).
  • [ ] If the CISG is to be excluded, do so expressly — a clause choosing "the laws of New York" is insufficient, because the Convention is part of New York law.
  • [ ] Consider whether the CISG's absence of a statute of frauds and parol evidence rule actually favors the client before excluding it reflexively.
  • [ ] Identify the state whose Article 2 enactment governs and confirm any non-uniform amendments.
  • [ ] Identify which § 2-318 alternative that state adopted, which determines downstream warranty beneficiaries.

Phase 2 — Choose the contracting architecture

  • [ ] Decide between (a) an exchange of forms, (b) a signed master agreement with releases against it, or (c) a click-through or portal acceptance.
  • [ ] Recognize that under § 2-207 an exchange of forms usually produces the Code's defaults — implied warranties intact, consequential damages available, no arbitration clause.
  • [ ] If the client's key protections are a warranty disclaimer and a damages cap, insist on a signed master agreement. Form terms will not carry them.
  • [ ] For a master agreement, draft an order of precedence clause: master agreement controls over purchase orders and acknowledgments, and any conflicting preprinted terms are of no effect.
  • [ ] Confirm the master agreement covers all future orders and does not expire silently.
  • [ ] For portal or EDI transactions, confirm the terms are presented before acceptance and that assent is recorded.
  • [ ] Confirm who in the organization has authority to bind, and whether the counterparty's signatory does.

Why it matters, and the traps. This is the single highest-leverage decision in the sequence and it is usually made by default. A seller with $40 million of annual sales relying on the back of an acknowledgment form has no warranty disclaimer and no damages cap, and does not know it.

Phase 3 — Fix the commercial terms on the face

  • [ ] Quantity — the one term the statute of frauds requires, and the ceiling on enforceability. § 2-201(1).
  • [ ] Description and specification, with revision level and date.
  • [ ] Price, and whether it is firm, indexed, or subject to surcharge.
  • [ ] Delivery date or schedule, and whether time is of the essence.
  • [ ] Delivery term and its source (UCC or Incoterms — see Phase 10).
  • [ ] Payment terms and any discount.
  • [ ] For a requirements or output contract, state the estimate — § 2-306 measures disproportion against it.
  • [ ] Confirm the front of the document is internally consistent with the back.

Phase 4 — Install the formation controls

Buyer side

  • [ ] Include a clause expressly limiting acceptance to the terms of the offer. § 2-207(2)(a) then excludes the seller's additional terms entirely.
  • [ ] State that any different or additional terms in the seller's acknowledgment are objected to and rejected. § 2-207(2)(c).
  • [ ] State that commencement of performance constitutes acceptance of the buyer's terms.

Seller side

  • [ ] Decide whether to use expressly conditional language under § 2-207(1) — and understand the consequence: if it works, no contract forms on the documents, and performance produces a § 2-207(3) contract of agreed terms plus Code defaults, which is the outcome the seller was trying to avoid.
  • [ ] If used, draft it so it clearly demonstrates unwillingness to proceed without assent, not merely "subject to the terms herein."
  • [ ] Consider instead requiring signed assent to a short set of key terms as a condition of shipment — a practice that actually works.
  • [ ] Provide for acknowledgment before shipment, so a nonconforming acknowledgment can be resolved before performance moots the question.

Why it matters, and the traps. The expressly conditional clause is a trap for the party using it. Winning step one of § 2-207 usually means losing at step three, because § 2-207(3) strips both parties' contested terms and installs the Code's. Sellers who want protection should seek assent, not conditionality.

Phase 5 — The incoming confirmation protocol

  • [ ] Establish a rule that every incoming order acknowledgment, confirmation, or invoice is reviewed by a named person on receipt.
  • [ ] Object in writing within ten days to any term not accepted. § 2-201(2) otherwise satisfies the statute of frauds against the recipient — binding a party who signed nothing.
  • [ ] Use a standard objection template that identifies the document, states the objection, and reserves rights.
  • [ ] Confirm the objection is sent to a person and address that will be treated as receipt.
  • [ ] Log the date received and the date objected.
  • [ ] Train purchasing and sales personnel on the ten-day rule specifically — it is invisible and it is unforgiving.

Phase 6 — Control the express warranties

  • [ ] Inventory every document that describes the goods: specifications, datasheets, drawings, sales literature, proposals, demonstrations, and samples.
  • [ ] Recognize that each creates an express warranty under § 2-313 without any intent to warrant and without the word "warranty."
  • [ ] Recognize that express warranties are effectively undisclaimable — § 2-316(1) makes a negation inoperative where inconsistent.
  • [ ] Seller side: review sales materials for performance claims the product cannot reliably meet. Remove or qualify them.
  • [ ] Seller side: state expressly which documents are part of the contract and which are illustrative only — and be aware that a court may not honor that as to specific performance claims.
  • [ ] Buyer side: incorporate the specification, datasheet, and any performance claims into the contract by reference, with version and date.
  • [ ] Buyer side: if a sample or model was provided, say so and identify it.
  • [ ] Address whether a demonstration unit or pilot run sets the standard.

Why it matters, and the traps. The most common warranty exposure is not the warranty clause. It is a performance figure on a datasheet that engineering could not consistently hit. Sales creates that exposure; legal never sees it.

Phase 7 — Draft the warranty

  • [ ] State what is warranted: conformity to specification, freedom from defects in material and workmanship, or a performance standard.
  • [ ] State the duration and its start point — shipment, delivery, installation, or first use. These differ by months.
  • [ ] State the remedy: repair, replacement, refund, or a combination, and who chooses.
  • [ ] State who pays for removal, reinstallation, freight, and downtime.
  • [ ] State the exclusions: misuse, unauthorized modification, normal wear, improper storage or maintenance, and use outside specification.
  • [ ] State any conditions: registration, maintenance records, use of specified consumables.
  • [ ] Address replacement parts — does the warranty restart, continue, or expire with the original term?
  • [ ] Address pass-through of component manufacturers' warranties.
  • [ ] Buyer side: consider a warranty explicitly extending to future performance of the goods, which moves the § 2-725 accrual date to discovery.
  • [ ] Seller side: avoid future-performance language for exactly that reason, and phrase the obligation as a repair remedy rather than a performance promise.

Phase 8 — Draft the implied warranty disclaimer

  • [ ] To disclaim merchantability, the language must mention merchantability. § 2-316(2).
  • [ ] To disclaim fitness for a particular purpose, the disclaimer must be in writing and conspicuous; general language such as "There are no warranties which extend beyond the description on the face hereof" suffices.
  • [ ] Make it conspicuous: capitals, or larger type, or contrasting type or color, or a heading in larger or contrasting type. § 1-201(b)(10).
  • [ ] Remember that conspicuousness is decided by the court, not the jury — and that a disclaimer set in the same small type as surrounding boilerplate is not conspicuous.
  • [ ] Consider "as is" or "with all faults" language as an alternative under § 2-316(3)(a) — but note it is generally unsuitable for new goods and unavailable in many consumer contexts.
  • [ ] Consider whether the buyer's examination or refusal to examine excludes warranties as to apparent defects. § 2-316(3)(b).
  • [ ] Confirm the disclaimer does not contradict an express warranty in the same document. § 2-316(1).
  • [ ] For consumer products, confirm the Magnuson-Moss prohibition: a supplier giving a written warranty or a service contract may not disclaim implied warranties. 15 U.S.C. §§ 2301–2312.
  • [ ] Buyer side: strike the disclaimer, or narrow it to exclude the fitness warranty only where the buyer supplied the specification.

Phase 9 — Draft the remedy limitation

  • [ ] State that the limited remedy is exclusive — otherwise it is merely optional. § 2-719(1)(b).
  • [ ] State the consequential damages exclusion clearly, and define what is excluded (lost profits, lost revenue, business interruption, loss of use, loss of data, cost of substitute goods, and third-party claims).
  • [ ] State expressly that the consequential damages exclusion is independent of, and survives the failure of essential purpose of, any limited remedy. This single sentence resolves the majority split under § 2-719(2).
  • [ ] Include an aggregate liability cap, and state whether it is the contract price, the price of the affected goods, or a fixed sum.
  • [ ] State which claims are outside the cap: indemnity obligations, confidentiality breach, gross negligence or willful misconduct where the law requires, and personal injury.
  • [ ] Confirm the limitation does not exclude consequential damages for personal injury in consumer goods — prima facie unconscionable under § 2-719(3).
  • [ ] Buyer side: carve out damages arising from defective goods that cause downtime, contamination, recall, or third-party claims — those are the ones that matter.
  • [ ] Buyer side: ensure the cap does not swallow the indemnity.
  • [ ] Confirm the limitation is not unconscionable in context. § 2-302.

Phase 10 — Delivery, title, and risk of loss

  • [ ] State the delivery term and which regime defines it — UCC §§ 2-319 to 2-324 or Incoterms (and which edition).
  • [ ] Confirm whether the contract is a shipment contract (risk passes on delivery to the carrier) or a destination contract (risk passes on tender at destination). § 2-509.
  • [ ] State who selects and pays the carrier, who arranges insurance, and who bears loss in transit.
  • [ ] State the place of delivery specifically.
  • [ ] Address partial shipments and whether they are permitted.
  • [ ] Address packaging, labeling, and documentation requirements — noting that inadequate packaging breaches merchantability under § 2-314(2)(e).
  • [ ] State when title passes, recognizing that Article 2 makes title largely irrelevant to remedies.
  • [ ] Address retention of a security interest for unpaid goods, and confirm it will be perfected. See Taking and Perfecting a Security Interest: A Practical Checklist.
  • [ ] Address customs, duties, and import compliance for cross-border shipments.

Phase 11 — Inspection, rejection, and acceptance

  • [ ] State the inspection period and where inspection occurs.
  • [ ] State that payment does not constitute acceptance, if that is the intent — otherwise payment-against-documents terms defeat pre-payment inspection under § 2-513(3).
  • [ ] State the method and content of a rejection notice.
  • [ ] Address the disposition of rejected goods: who stores, who ships back, who pays.
  • [ ] Seller side: include a reasonable defect notice period, but not an unreasonably short one — that materially alters under § 2-207 Comment 4 and may be unconscionable.
  • [ ] Buyer side: preserve the right to revoke acceptance under § 2-608 for latent defects.
  • [ ] Address whether the contract is an installment contract under § 2-612 — because if it is, perfect tender does not apply and rejection requires substantial impairment.
  • [ ] Address the seller's right to cure and its limits. § 2-508.
  • [ ] Both sides: establish an internal protocol to send written notice of breach under § 2-607(3)(a) the day a problem with accepted goods is identified. Failure bars any remedy.

Phase 12 — Price, payment, and credit

  • [ ] State the price, currency, and whether taxes and duties are included.
  • [ ] Address price adjustment: index, surcharge, most-favored-customer, or firm-fixed.
  • [ ] State payment terms, discounts, and interest on late payment — noting that an interest clause generally does not materially alter under § 2-207 Comment 5.
  • [ ] Address setoff rights, and whether the buyer may deduct damages from the price under § 2-717.
  • [ ] Address credit support: deposit, letter of credit, guaranty, or a purchase money security interest.
  • [ ] Address the seller's rights on the buyer's insolvency: stoppage in transit under § 2-705 and reclamation under § 2-702.
  • [ ] For a letter of credit, confirm the documentary requirements match what the seller can actually produce.

Phase 13 — Force majeure and allocation

  • [ ] Do not rely on § 2-615 alone — draft the clause.
  • [ ] List excusing events, and include a catchall drafted to avoid ejusdem generis narrowing.
  • [ ] Address whether the clause covers the buyer's performance (payment is rarely excused) as well as the seller's.
  • [ ] State the consequences: suspension, extension, allocation, or termination — and after what period.
  • [ ] Include an allocation methodology consistent with § 2-615(b): fair and reasonable among customers, and whether regular non-contract customers may be included.
  • [ ] Require prompt written notice with an estimated duration and quota, per § 2-615(c).
  • [ ] Address the buyer's right under § 2-616 to terminate or take the quota within thirty days.
  • [ ] State whether increased cost alone excuses — it does not under § 2-615 Comment 4, so say so expressly if the parties intend otherwise.
  • [ ] Address supply chain and subcontractor failures, which are not automatically excusing.

Phase 14 — Assurance, default, and termination

  • [ ] Reference the right to demand adequate assurance under § 2-609 and set the response period at thirty days.
  • [ ] Define events of default for both parties.
  • [ ] Provide for cure periods and their length.
  • [ ] Address termination for convenience and the compensation payable — work in process, raw material commitments, and cancellation charges.
  • [ ] Address the effect of termination on outstanding orders, warranty obligations, and spare parts supply.
  • [ ] Address transition assistance and last-time-buy rights for a discontinued product.
  • [ ] Confirm survival of the warranty, indemnity, confidentiality, and limitation of liability provisions.

Phase 15 — Infringement indemnity

  • [ ] Note the statutory baseline: a merchant regularly dealing in goods of the kind warrants delivery free of the rightful claim of infringement. § 2-312(3).
  • [ ] Note the statutory carve-back: a buyer who furnishes specifications must hold the seller harmless against claims arising from compliance. § 2-312(3).
  • [ ] Draft an express indemnity covering defense, settlement, and judgment.
  • [ ] Address control of the defense and consent to settle.
  • [ ] Address the seller's options on an injunction: procure the right to continue, modify, replace, or refund.
  • [ ] Address whether the indemnity is subject to the liability cap — it should not be.
  • [ ] Address combination and modification exclusions.
  • [ ] Address geographic scope of the indemnity.

See Clearing a Product for Launch: How to Conduct a Freedom-to-Operate Analysis and Running a Freedom-to-Operate Patent Search: A Practical Checklist.

Phase 16 — Compliance clauses

Phase 17 — Dispute resolution and limitations

  • [ ] Governing law, and whether it displaces the CISG expressly.
  • [ ] Forum — exclusive or permissive, and note that an exclusive forum clause is close to dispositive after Atlantic Marine Construction Co. v. U.S. District Court, 571 U.S. 49 (2013). Say "exclusive."
  • [ ] Whether to arbitrate, and if so the rules, seat, number of arbitrators, and scope. See Drafting an Arbitration Clause: A Practical Checklist.
  • [ ] Whether the clause covers tort and statutory claims, not just contract claims.
  • [ ] Limitations period — § 2-725 gives four years, reducible by agreement to not less than one year and not extendable. Seller side: reduce it. Buyer side: resist.
  • [ ] Jury waiver, where enforceable.
  • [ ] Attorney's fees — the American rule applies absent a clause.
  • [ ] Notice provisions — addresses, method, and when deemed received. These govern the § 2-607(3)(a) notice that decides so many cases.

Phase 18 — The operational protocol

Contract terms are worth nothing if the organization does not follow them. Install these:

Purchasing organization

  • [ ] Review every incoming acknowledgment and confirmation and object in writing within ten days.
  • [ ] Document inspection on receipt, with photographs and a dated record.
  • [ ] Send written notice of breach the day a defect in accepted goods is identified.
  • [ ] Do not sign the seller's forms or click through portal terms without review.
  • [ ] Escalate any specification change to legal before accepting.
  • [ ] Use § 2-609 assurance demands in writing when a supplier looks unstable.

Sales organization

  • [ ] Route performance claims in proposals and datasheets through a review process — they are express warranties.
  • [ ] Do not answer "will this work for our application?" without recognizing that the answer creates a § 2-315 fitness warranty.
  • [ ] Use the approved acknowledgment form and do not modify it in the field.
  • [ ] Escalate any customer form containing an acceptance-limiting clause.
  • [ ] Document any cure attempt with dates and scope — the § 2-508 and § 2-719(2) analyses depend on it.

Both

  • [ ] Maintain a contract file per relationship: the master agreement, all orders and acknowledgments, all objections, all specifications by version, and all notices.
  • [ ] Diarize the § 2-725 limitations date from tender of delivery, not from discovery.

Worked example — Kestrel and Aldergrove

Phase 1. Sale of goods with installation; predominant purpose is goods. Domestic, so no CISG. Governing state's Article 2 adopted § 2-318 Alternative A.

Phase 2. Kestrel's counsel calculates that the annual spend justifies a signed master agreement. Aldergrove agrees, having realized in a prior dispute that its acknowledgment terms had never governed anything.

Phase 6. Aldergrove's datasheet promises a throughput figure that engineering hits only under ideal conditions. It is revised to state the figure under specified conditions — eliminating an express warranty the company could not have disclaimed.

Phase 8. The disclaimer is set in bold capitals under a bold heading, mentions merchantability by name, and appears above the signature block rather than on a back page.

Phase 9. The remedy is repair or replacement, stated as exclusive. The consequential damages exclusion states that it is independent of and survives any failure of essential purpose. The cap is the price of the affected equipment, with indemnity and personal injury carved out. Kestrel negotiates a carve-out for contamination-related recall costs, which is the exposure it actually cares about.

Phase 11. Because the mixers are delivered in three shipments over five months, the parties designate the contract an installment contract under § 2-612 — which suits both: Kestrel cannot reject a shipment over a trivial nonconformity, and Aldergrove cannot lose the whole contract over one bad unit.

Phase 18. Kestrel institutes the ten-day confirmation review and the same-day notice-of-breach rule. Fourteen months later, when the bearing assembly fails, the notice goes out that afternoon — preserving a claim that § 2-607(3)(a) would otherwise have barred entirely.

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