Dive Brief:
- Many distributor/sellers become entangled with contract issues on occasion, especially when the terms and conditions between sellers and buyers are unclear, Industrial Distribution reported Thursday. Often, the proliferation of electronic transmission between merchants can lead to oversight in terms that do not precisely line up, which can lead to breach of contract and litigation.
- The Uniform Commercial Code (UCC), the United Nations Convention on Contracts for the International Sale of Goods (CISG) and common law govern these disputes, depending on whether they involve distributors, international goods or sale of goods between non-merchants, respectively.
- Distributors who are regularly selling to merchants are best served to promote a regular examination of terms in order to prevent any unwelcome surprises.
Dive Insight:
When dealing with contracts, new relationships, or even old ones a little extra scrutiny upfront can save signifcant amounts of money in the long-run.
While some contract disputes can be settled easily, others erupt once bankruptcy enters the picture. Such was the case between GM and Clark-Cutler-McDermott (CCM), a longtime supplier of GM parts including acoustic insulation and interior trim.
By the time the case went to court, CCM alleged that it was losing $30,000 per day as a result of damaging contracts initiated by GM. GM claimed that its supply chain would be disrupted by the company's cessation and retention of production equipment. Though CCM spent months entreating GM to relent on its pricing demands, ultimately the company was unsuccessful at renegotiating terms.
In the end, GM claimed tooling and other parts from its sinking former supplier, whose closing affected local governments in Massachusetts and Georgia, where CCM operated a second factory at GM's suggestion, as well as fiber and other materials makers which provided the raw material CCM turned into trim for GM.
