With perishable goods, delicate packaging and high industry standards, even small defects can have a big impact on food and drink firms.
So what can buyers actually do if supplies arrive damaged? In this scenario, businesses generally have three options:
- Rejection
- Damages
- And, in the most serious cases, injunctions.
Rejection
Where supplies fail to meet the contractual standard, whether that standard is expressly agreed or implied by law, the buyer will usually have an immediate right to reject.
Supplies could be rejected if:
- They are not of satisfactory quality. This could include dented cans, compromised packaging and goods close to or past their best perishable date (unless this is provided for specifically within the contract).
- They are not fit for purpose. This could include chilled food that has been delivered above the appropriate temperature tolerances or supplies with allergen or labelling errors.
- They fail to match the provided description or previously supplied sample. Examples would include failure to match description by size, taste or appearance.
If a buyer wishes to reject the delivered supplies for any reason, the supplier must be notified immediately. If any steps are taken to incorporate the supplies or use them in any way, there is a risk that the right to reject will be lost.
It will be a factual question as to whether the supplies have been accepted but delay could compromise its position. Practically, it is advisable to check any supplies immediately upon receipt to ensure that any issues can be identified, evidenced and reported.
If a buyer wishes to reject supplies, it should document the condition they arrived in, paying specific and close attention to the identified defect. If there is an issue with temperature, ensuring that any photograph includes evidence of the temperature will assist. It is also important to maintain a clear and accurate log of the issue and document any losses.
The buyer should notify the supplier immediately that is is rejecting the supplies and the reason for the rejection. It should request confirmation of the address to return the products to.
The supplier may not provide the address and/or may refuse to accept that the right of rejection exists in the specific circumstances. It is important to provide the supplier with the full suite of evidence and make clear that absent confirmation of the relevant address the supplies remain available for their collection.
Breach of contract claims
If the defect only comes to a buyer’s attention after the supplies have been accepted (either voluntarily - i.e. by formal email or communication - or by conduct - i.e. delay in rejection or incorporating the supplies into its own product), the remedy would typically be a claim for damages.
The aim of a claim in damages is to put the buyer in the position it would have been in had the contract been properly performed.
This can include (but is not limited to):
- Cost of replacement goods
- Loss of profit
- Cost of disposal
- Wasted processing time
It is important to check the terms of the supply contract carefully before entering into it as, usually, a supplier will try and include clauses which limit either the types of damages that can be claimed or the amount. In addition to this, some supply contracts include strict reporting obligations which, if not met, could result in the supplier being able to argue that they are not liable for a claim in damages at all.
Clauses excluding liability for supplying unsafe or non-compliant food may face enforceability challenges depending on the circumstances.
As with rejection, it is important to record and log evidence of the damage to the supplies and the impact that it has on the business. The supplier should be notified and invited to settle the damages suffered.
It is important to note that there is an obligation to mitigate losses in relation to breach of contract claims. A buyer must therefore take steps to attempt to reduce the losses suffered as much as they can.
Injunctions
An injunction is a rare occurrence in relation to damaged supplies. Injunctions are difficult to obtain and are reserved for circumstances which are critical and, where damages would not adequately compensate the buyer. An example of this may be where the buyer needs the court to compel compliance with agreed standards (mandatory injunction) or prevent further breaches (prohibitory injunction).
If a buyer considers that they need an injunction, acting with haste is key. Any delay could impact the likely success of such action. It is advisable to seek urgent legal advice.
Key takeaway
Food and beverage businesses have options if supplies arrive damaged. The key is always acting quickly and preserving evidence.
It is also critically important that a buyer is aware of the terms of the supply contract and any time limits, or restrictions that may be placed upon them. A clearly drafted and defined supply contract should assist in avoiding any disputes that may arise.
In taking these steps, the buyer should, hopefully, be able to resolve any difficulties with the supplier without the need for legal intervention or action.
These options relate specifically to supplies, the position with regards to white goods, machinery or bespoke goods will differ slightly. This may also be the case if supplies are incorporated by the supplier prior to delivery.
About the author
Chloe Goodwin is an associate in the commercial dispute resolution team at Birketts LLP. Her experience includes advising and acting for clients in relation to a wide variety of disputes, including breach of contract and contract interpretation, shareholder disputes (including unfair prejudice petitions and breach of directors’ duties), professional negligence claims, defamation, and complex high-value commercial debt recovery (both in the UK and abroad).
