Dive Brief:
- Ashley Furniture and Hanjin Shipping will face off in a federal bankruptcy court today as the two companies battle over unfulfilled payments by Ashley Furniture due to the carrier's post-bankruptcy disruptions, the Journal of Commerce reports.
- Court documents show Ashley Furniture petitioned on October 4 to withhold payments owed to the carrier equal to the amount charged by another carrier to perform work left unfulfilled by Hanjin, the Wall Street Journal reports.
- Hanjin, however, argues that allowing customers to withhold fees would affect its necessary liquidity and cause a default in the post-bankruptcy financing received from Korean Airlines. In addition, maritime law allows carriers to hold cargo until shippers pay for it, which Ashley Furniture never did.
Dive Insight:
Ashley Furniture did what any shipper would, when faced with a disruption. The retailer sought the most expedient way to get its goods to store and avoid further losses. Typically, the carrier would assume a penalty for the disruption, but bankruptcies are different.
With dozens of similar cases likely, if not already on their way, and additional contractual obligations to pay off - any change in the forecasted revenue for Hanjin could impact the company's ability to regain solvency. The real legal question, though, revolves around whether Hanjin breached its contractual obligations by not completing its delivery, or Ashley Furniture did by never paying for the cargo before retrieving it.
Regardless, the bankruptcy court's decision could open or close the floodgates of claims against the carrier which are unlikely to end any time soon.
Two lessons can be gleaned from the latest episode in the Hanjin crisis: always fulfill contractual obligations even when the other party fails to; and always watch out for carriers' or suppliers' financial risks.
