Vendor Disputes

Establishing strong relationships between a company and its vendors are crucial to commercial success. Vendors supply the materials, parts, services, and other deliverables required to keep a business running smoothly. Problems or disputes with vendors disrupt business operations and hinder profits. Vendor disputes may stem from supply chain complications, inaccuracies in estimates, unclear communication, or explicit failures to abide by the terms of the vendor contract. Additionally, there are circumstances in which vendors perform well under the contract initially, but the quality of their goods and services degrades over the course of the relationship. Even when an abundance of care is taken in establishing and maintaining a vendor relationship, disputes can occur. Examples of causes for vendor disputes include: 

• Late delivery
• Partial delivery
• Delivery of the wrong products
• Delivery of defective products
• Overcharging for supplies
• Price changes
• Other terms that differ from the contractual agreement

Vendor Disputes: Agreement Breaches

The terms of the vendor contract are crucial for preventing and resolving disputes. Terms of the vendor relationship must be clearly defined and accepted by both parties. Communication between the parties must stay robust for the entirety of the vendor relationship. Comprehensive vendor contracts can help to foster a successful vendor relationship. The contract sets the tone for the parties’ relationship by clearly defining the terms and conditions governing the business arrangement. Typical terms and conditions found in vendor contracts include:

• What is expected of the parties
• What kinds of actions constitute a breach of the agreement
• Remedies for agreement breaches
• Arbitration and/or mediation requirements, if any
• The circumstances under which the contract can be terminated

Breaches by vendors must be handled promptly and effectively. It is not advisable for a company to establish a practice of overlooking or allowing breaches of the vendor contract, even if these breaches do not seem material initially. When vendor breaches are allowed or overlooked, it not only sets a standard for future vendor breaches, but also makes the process of remedying the breach more difficult down the road. The vendor that delivers late goods may argue the company has accepted late goods in the past, and therefore gave the impression the delivery date was not a hard deadline.

Vendor Disputes: Terminating Agreements

A vendor agreement should provide terms for when and how the agreement can be terminated by either party. A contract termination usually is allowed only in the event of a material, or major breach. Material breaches are violations of essential terms of the contract. A material breach causes enough damage to the vendor relationship as to render the agreement irreparably broken and/or defeats the purpose of the contract itself. An example of a material breach of a vendor agreement would be the failure of a vendor to provide a Website that the vendor contracted to create. A minor or immaterial breach of a Website design contract would be made if the Web designer delivered a Website to the company but failed to deliver it by the date promised in the contract.

Absent provisions in the agreement to the contrary, both parties must voluntarily agree to terminate a vendor agreement. When this happens, then the agreement can be terminated without help from outside parties. However, when there is disagreement between the parties to the contract about whether a material breach has indeed occurred, consulting with a vendor dispute attorney may be necessary.

Vendor Disputes: How We Can Help

The vendor dispute attorneys at Payne & Fears help clients to establish and assess the terms of their vendor relationships. Our experienced attorneys help draft enforceable vendor contracts with useful terms and conditions. They also regularly assist clients update current forms. When vendor disputes arise, our attorneys help clients evaluate the nature of the dispute, assess whether a breach has occurred and the extent of the damages from a breach of the vendor contract. Once we have received this critical information, we formulate a strategy for quickly and effectively resolving the matter for our clients. This may mean applying more pressure in negotiations with a vendor. Where out-of-court negotiations fail, we help clients navigate the mediation and/or arbitration process, or litigation if arbitration is not an option. While we work to encourage the settlement of vendor disputes without litigation, we also remain ready to defend our client’s interests in court wherever necessary. Our experienced vendor dispute litigators help clients determine their strongest stance from the beginning of dispute resolution and work tenaciously until an adequate resolution is achieved, whether in or out of court.