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How should you respond to a supplier’s breach of contract?

On Behalf of | Apr 21, 2021 | Business Disputes

Whether you run a restaurant, a retail shop or a manufacturing facility, reliable suppliers are key to daily operations. Your company needs to know that it has critical resources available to turnout products, keep manufacturing staff productive or bring customers through the doors.

Suppliers can breach their contract with your business in several different ways. They might suddenly stop making deliveries, leaving you in a lurch. They might have agreed to supply a certain amount of necessary goods and materials at a certain price, only to later reduce the quantity that they provide or demand a higher price.

A supplier breaking their contract with your company might mean hours of labor costs with no product to show for it or even an inability to make what customers expect. How should you handle a supplier’s breach of contract?

Try to understand their reasoning

If your company has done business with the same supplier for years and this is the first time you’ve had an issue, they likely deserve the benefit of the doubt. Reaching out to inquire about what led to the issue could be a starting point to negotiate the issue directly.

A simple text or email could solve the issue. If not, you can send a formal demand letter asking for them to correct the issue. If you can’t get a response or if the company’s answer doesn’t justify their actions, your next step may need to involve filing a civil suit.

Lawsuits often open the door to negotiation

Your supplier may become willing to negotiate or possibly sit down at mediation with you when you make it clear you will stand up for yourself by filing a civil suit. Before you agree to mediation or a joint negotiation session, make sure that you determine what outcome is best for your business.

If you can’t trust the company to uphold its obligations to you, you may not want to continue the contract, but you may need a refund or delivery and fulfillment of a purchase for which your company already paid.

Having evidence that shows the secondary financial losses your company incurred, such as expenses related to shutting down due to lack of supplies, could give you more leverage in these negotiations. 

You may have to ask a judge to help you

Even if you try mediation, you may not be able to resolve the matter in a way that works for your company outside of court. Possible that your company may have no choice but to ask the courts to intervene.

Whether you need to seek lawsuits from the direct consequences of a material breach of contract or just wish to sever your obligations to a company that does not hold their responsibilities to you, a judge’s ruling could be the most efficient and irrefutable way of doing so.