We supply children’s clothing to a number of retailers but have a problem with a new supplier. We recently signed an agreement with a manufacturer for a new range we’ve launched and were impressed with the samples supplied and the partners we spoke to. However, the quality of the first batch we’ve received is clearly of a lower standard than we expected. The supplier insists they’re of the same quality and we don’t have the samples to prove they’re not. This could seriously damage our image with retailers, but we’ve signed a 12-month agreement. Should we pull out of the deal and risk legal action or is there a way to resolve the dispute?
A. Jim Rogers of Grant Thornton writes:
Dealing with suppliers is always a fine balancing act of getting quality goods at a fair price, and managing the relationship with your supplier is key. In a situation where you disagree but have no samples to prove your position you can either return the product and refuse further supply or accept the goods and hope that the rest of the supplies are up to standard.
Refusing further supply will run the risk of legal action against you, assuming the supplier continues to dispute your claim. You will probably have to find an alternative supplier and all while managing your relationship with the retailers, taking into account their expectations, any contractual obligation you have to supply them, how readily you can find an alternative supplier and the cost implications.
Accepting the goods again involves careful management of the situation with the retailers you are supplying. You must take into account their expectations and your contractual obligation, as there is both a risk to your reputation and the possibility of legal action from your customers if they are not satisfied with the quality.
Depending on the situation with the original supplier, you may be able to work with them, obtain some more samples and ensure future batches are of the quality you expect. Careful negotiations may result in a compromise and help you maintain relationship with them and honour agreements you have with the retailers.
However, before further discussions or negotiations take place, you must seek appropriate legal advice on your contractual obligations to your supplier and your customers.