For many businesses, supplier disputes are a fact of life. Their impact can be severely disruptive, particularly when the goods involved are critical to your business.
Understanding how to minimise the chance of a dispute and how best to manage any that do arise is key to mitigating their potential impact on your operations, reputation and, ultimately, profitability. In this article, our business dispute solicitors discuss the common causes of supplier disputes and how they can be resolved.
If you are reading this article because you’re dealing with a supplier dispute or want expert advice on avoiding one, contact our business dispute solicitors today. We specialise in helping businesses resolve supplier issues quickly and protect their supply chains.
Contents:
- How can I tell if my supplier has breached our agreement?
- What should I do if I suspect there has been a breach of the supplier agreement?
- What evidence do I need to make a claim?
- How can supplier disputes be resolved?
- What remedies are available if the supplier is at fault?
- How can I prevent future disputes with my supplier?
- Summary
How can I tell if my supplier has breached our agreement?
One of the most common challenges for business owners is working out whether poor supplier performance actually amounts to a breach of contract. The answer often lies in the detail of your agreement. If your supplier has delivered goods late, supplied products of inconsistent quality, or invoiced you for amounts you didn’t agree to, it may seem like a clear breach on the face of it. When it comes to the law, not every mistake or delay is serious enough to justify ending the agreement or withholding payment.
Contracts usually distinguish between minor breaches and material breaches. A minor breach might be something like a single late delivery, which is inconvenient but does not fundamentally undermine the purpose of the contract. A material breach is more serious, such as repeated failures to deliver, supplying entirely the wrong goods, or changing prices and terms without your agreement. The difference matters because a minor breach may only entitle you to damages, while a material breach could allow you to terminate the contract altogether.
It is also worth checking the wording of any service levels, quality standards or delivery deadlines in your agreement. If the contract specifies exact dates, quantities or technical specifications, you may have a stronger case than if the terms are vague. Even so, the courts will often look at the commercial reality: has the supplier’s conduct deprived you of the main benefit of the contract? If so, you may be entitled to treat it as a material breach.
What should I do if I suspect there has been a breach of the supplier agreement?
Once you suspect a breach, the natural reaction is often to stop payments or cancel future orders. While understandable, this can be risky. If it later turns out that the supplier’s conduct didn’t amount to a material breach, you could be accused of unlawfully terminating the contract yourself. That in turn could expose your business to liability for damages.
A safer first step is to raise the issue promptly and in writing. Setting out your concerns clearly, and referring to the relevant parts of the contract, shows that you are taking a measured approach. This can also help preserve the relationship, as many suppliers are willing to put things right when problems are flagged early.
Check whether your contract includes a dispute resolution clause. Many agreements require the parties to attempt negotiation or mediation before resorting to legal action. Following these procedures is not only important to preserve your rights under the contract, but it can also be a cost-effective way of reaching a resolution.
If the problem persists and your supplier remains uncooperative, you may need to escalate matters to a more formal stage. This could mean instructing a business dispute solicitor to draft a letter before action. This letter will set out your legal position clearly and warn the supplier of the consequences if matters are not resolved – and it often prompts a settlement without the need for court proceedings.
What evidence do I need to make a claim?
If matters do escalate, the strength of your claim will depend heavily on the evidence you can present. At a minimum, you will need the contract itself and any relevant order forms or amendments. Alongside that, keep copies of emails, letters and notes of phone calls where problems were raised or assurances given. Delivery notes, receipts and service logs can provide valuable evidence of what was or wasn’t supplied.
For disputes involving faulty goods, photographs or independent inspection reports can be powerful. If delays have caused you to lose customers or incur extra costs, keep a record of these losses. Courts will want to see a clear link between the supplier’s breach and the damage to your business.
To make life easier, consider setting up an internal process for logging supplier issues as they arise. Even a simple spreadsheet noting the date, nature of the problem, and how it was resolved can help you spot patterns of poor performance and build a compelling case if you need to take action later.
How can supplier disputes be resolved?
The good news is that most disputes never reach court. Many are resolved through direct negotiation, especially where both parties want to preserve the commercial relationship. A frank discussion can sometimes achieve more than months of formal correspondence.
Where direct discussions stall, mediation is often a useful next step. Mediation involves an independent third party who helps both sides explore settlement options in a confidential setting. It’s usually quicker and cheaper than litigation, and allows for creative solutions that a court may not be able to order.
Some contracts specify arbitration as the chosen method of dispute resolution. Arbitration is a private process where an independent arbitrator hears the case and makes a binding decision. It can be faster and more discreet than court proceedings, though it does involve costs.
If none of these approaches work, you may have no option but to issue court proceedings. Under English law, most contract claims must be brought within six years of the breach, though it’s rarely sensible to wait that long. Court proceedings typically begin with a formal letter before claim, followed by the issue of proceedings in the County Court or High Court depending on the size and complexity of the dispute.
What remedies are available if the supplier is at fault?
If you succeed in proving your case, the remedies available will depend on the nature of the breach. In some cases, you may simply want the supplier to put things right, for example, by replacing faulty goods or completing an unfinished order. If that’s not possible, you may be entitled to a refund or compensation for any losses you have suffered as a result of the breach.
Where the breach is serious, you may also have the right to terminate the contract altogether. This can allow you to move on and find a more reliable supplier, though you should weigh the risks of potential disruption to your business carefully before taking that step.
Unfortunately, not all suppliers cooperate willingly, even when at fault. If a supplier refuses to comply with a court judgment, you may need to consider enforcement options such as instructing bailiffs or, in cases of insolvency, petitioning to wind up the company. These are last resorts, but they underline the importance of taking legal advice early to ensure your strategy is commercially sound.
How can I prevent future disputes with my supplier?
While no business can eliminate the risk of disputes entirely, there are practical steps you can take to reduce the chances. Regularly reviewing supplier performance helps you spot problems early, before they escalate. Raising concerns at the first sign of trouble can often resolve issues informally and avoid formal disputes altogether.
When negotiating new supplier contracts, build in protective clauses that make expectations clear. These might include measurable quality standards, service-level agreements, or penalties for late delivery. You can also limit the supplier’s ability to change prices or terms unilaterally. For contracts that are particularly high-value, it’s well worth seeking legal advice at the drafting stage to ensure your interests are properly protected.
It’s also wise to plan for unexpected events. A carefully drafted force majeure clause can clarify what happens if external factors, such as strikes, transport failures or global crises, disrupt supply chains. By addressing these scenarios in advance, you can reduce uncertainty and avoid arguments about who should bear the risk.
Summary
Supplier disputes can create significant disruption for growing businesses, but they don’t need to spiral out of control. By understanding the difference between minor and material breaches, responding in a measured way, and keeping detailed records, you put yourself in the best position to resolve issues quickly and cost-effectively. Where disputes cannot be settled informally, there are clear legal remedies available to protect your business and recover losses.
Taking the time now to strengthen your contracts and manage supplier relationships proactively provides the advantage of reducing the risk of future disputes too, leaving you free to focus on growth rather than firefighting.
