Small Business Disputes With Suppliers
Supplier disputes usually concern late delivery, quality, or a price that differs from what was expected. The outcome generally depends on what was agreed in writing before anything went wrong.
Establish the contractual position first
Identify which terms actually govern. Where each party sent their own standard terms, the question of whose apply is determined by the sequence of exchanges rather than by whose were more comprehensive.
Check what was promised regarding delivery dates, specification and remedies for defects. Check whether time was stated to be essential, since that affects whether late delivery is a fundamental breach.
Check any limitation of liability, which frequently caps the supplier's exposure at the contract value and excludes consequential losses such as your lost profit.
Documenting the problem
Record the defect or failure immediately with dates, photographs and any measurable evidence.
Notify the supplier promptly and in writing. Many contracts impose short notification periods for rejecting goods, and missing them can amount to acceptance.
Keep the goods available for inspection rather than disposing of or repairing them before the supplier has had the opportunity to examine them.
Escalating proportionately
Start with the account manager, in writing, setting out the problem and what you want.
Escalate to a named senior contact if unresolved, with a summary of the history and a deadline.
A formal letter before action, setting out the claim, the amount and a deadline, resolves a substantial proportion of remaining disputes because it changes who inside the supplier organisation becomes involved.
Mitigating your loss
You are generally expected to take reasonable steps to limit your losses, and failing to do so reduces what you can recover.
Source elsewhere if you can, keep records of the additional cost, and do not simply allow losses to accumulate while waiting for resolution.
Withholding payment
Tempting and risky. Withholding payment where the contract does not permit it can put you in breach, giving the supplier a claim against you.
Where there is a genuine dispute about part of an invoice, paying the undisputed portion and clearly identifying the disputed amount in writing is the safer approach.
Set-off rights depend on the contract and the jurisdiction, and should be checked rather than assumed.
Resolution routes
Mediation is faster and cheaper than litigation and preserves a commercial relationship where one is worth preserving.
Many commercial contracts specify a dispute resolution procedure, sometimes including mandatory mediation or arbitration, which must be followed.
Small claims procedures suit straightforward undisputed sums. Larger or complex claims need advice, and the cost of proceedings should be weighed against the amount and the prospects.
This article is general information and not legal advice.
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