3 Common Disputes With Suppliers

In Short

• Address delays in your supplier contract to avoid issues during peak seasons.

• Ensure goods meet agreed quality standards by using samples and specifying contract terms.

• Know your rights regarding faulty goods and include clear terms on transportation and liability.

Tips for Businesses

To prevent disputes, ensure your supplier contracts clearly outline delivery times, quality standards, and liabilities for damages. Use samples to avoid disagreements on product quality, and make sure to specify shipping and payment terms. Having clear contractual clauses upfront can save time, money, and resources in case of disputes.

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Table of Contents

• 1. Delay
• 2. Poor Quality Goods: Not What I Asked For
• 3. The Goods Are Faulty. Can I Reject Them?
• Avoiding Disputes With Suppliers in the First Place
• Damaged En Route
• Key Takeaways
• Frequently Asked Questions

You have just started your own business or e-commerce site and are about to put down the deposit for your first batch of stock. It is an exciting, busy time. However, you should be aware of the common problems that arise between businesses and suppliers. A dispute with a supplier can be a huge strain on your business, energy and resources. This article will explain three common problems:

1. delay;
2. poor quality goods; and
3. faulty or damaged goods.

1. Delay

You should always include a clause in your supplier contract that addresses delays associated with the production and delivery times of the goods. A minor delay may not bother you. However, these small delays can be detrimental around key retail periods such as Christmas.

If your supplier contract does not include any provisions about delays, then the rules of common law (decisions made in the courts) or international sales of goods treaties will apply. This means that you will have to prove that you have suffered a loss as a result of the delay in order to claim compensation.

However, if you include a provision in your contract that outlines what happens when goods are delayed, you do not have to prove there was any loss. The supplier’s breach of the contract is enough to give rise to a right to sue itself.

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Negotiating a Resolution

Using legal means to resolve delays will take time, energy and money. Therefore, you should consider whether negotiating a resolution is possible.

This might mean asking the supplier to pay the additional expenses for express shipping or agreeing to receive a discount on your next order. Alternatively, you could ask for a refund of an agreed amount.

If you can’t negotiate an agreement, a qualified lawyer can draft a letter of demand to enforce your rights and ensure your business’ interests are protected.

2. Poor Quality Goods: Not What I Asked For

Legal arguments about the quality of goods can be very difficult because, as long as the goods are fit for their purpose, you may not be able to reject them.

3. The Goods Are Faulty. Can I Reject Them?

If the goods are faulty, you can reject them. ‘Faulty’ usually means they are not fit for their purpose(s). If the terms of your contract are clear, you can compare the quality of the goods with the required quality specified in the original contract.

However, if your contract is silent on these matters, you may need legal assistance to clarify what was actually agreed between the parties according to law.

Avoiding Disputes With Suppliers in the First Place

The most practical way to protect yourself from getting into an argument over the quality of goods is to use actual samples of the product during your supplier contract negotiation. This will ensure that the supplier understands the quality of the goods your business wishes to purchase. Although it may be easier to send photos, they alone cannot tell you the true quality of the goods.

If the goods you receive are substantially different from the samples, then this makes it easier to prove that the goods were not of the quality that you agreed to. You should specify in your agreement that the quality of the goods supplied must match the quality of the samples. You should always keep a copy of the samples you have used in negotiations. Alternatively, ask for the supplier to return the original sample to you after they have taken specifications from it.

Further, you should always have an agreement in place that outlines the exact specifications of what:

• you are ordering; and
• quantity you are ordering.

If you are negotiating with an overseas supplier whose first language is not English, you may wish to use visual cues in your supplier contract.

For example:

Damaged En Route

You should be clear on the terms and conditions concerning the transport of your goods from overseas and within Australia. You may find that delivery times and liability for loss are not what you thought.

It is important to check this before you settle on a particular freight company.

Key Takeaways

To avoid disputes with suppliers, it is important to ensure that your contract is clear terms regarding:

• what happens if there is a delay in the supply of goods; and
• the quality of the goods expected.

In addition, including samples of your product during negotiations with the suppliers can further reduce the possibility of a dispute.

If you need further assistance, our experienced dispute resolution lawyers can assist as part of our LegalVision membership. You will have unlimited access to lawyers to answer your questions and draft and review your documents for a low monthly fee. Call us today on 1300 544 755 or visit our membership page. 

Frequently Asked Questions

What should I include in my supplier contract to avoid delays?

Ensure your contract includes a clause specifying the delivery timeline and remedies for delays, such as requiring the supplier to cover the cost of expedited shipping.

Can I reject poor quality goods?

As long as the goods are fit for their purpose, you may not be able to reject them. If the goods don’t meet the agreed standards or specifications, you may have grounds to reject them.