In this article we deal specifically with how your business and its liability is affected by the non-compliance of its suppliers, but above all, how you can avoid or minimize its consequences, since it is one of the most common legal problems in companies.
As is logical, companies and freelancers need to purchase goods and contract services in order to run their business, from office supplies to marketing campaigns, to name just a few examples. Unfortunately, it is not uncommon for the supplier not to fulfill the contract or for the client’s requirements not to be met, which can cause problems for any business, especially SMEs and micro-SMEs. Anticipating this and knowing how to act if it happens to you is essential to safeguard the interests of your business. Read on to find out what you can do to protect your rights. As always, do not hesitate to contact us. At Abogados Cabo we are here to serve you. Okay, let’s get started.
Evaluating the capacity of your suppliers
Having said the above, it is worth asking yourself what are the factors to take into account when choosing suppliers. In this regard, not only the quality of their work, or the price, but also their ability to cope with different types of contingencies, and therefore the risks of supplier non-compliance, should be taken into account.
In this sense, the evaluation of the capacity of your suppliers cannot be static, but will require periodic evaluations. Moreover, since the company’s responsibility towards its customers is not affected by the default of suppliers, with whom the company’s customers have no contract, it is necessary to have alternative suppliers with the capacity to supply a sufficient volume of products or services that are also of similar quality to those normally used by the company.
On the other hand, the activity of assessing the capacity to avoid non-compliance by suppliers does not have to be unequivocal, since not all suppliers are of equal importance or involve the same level of risk for the company. For this reason, the relevant information must be gathered in each case. This information will not only be useful for resolving an emergency situation, but also for adopting a different strategy, such as changing one or more suppliers.
Furthermore, it should be noted that for there to be a breach by suppliers it is not enough for them to fail to comply with the obligation assumed or to do so in a defective or partial manner, but it is also necessary for the breach to be imputable to them.
There are two criteria of imputability to determine whether or not there has been a breach by suppliers: intent and fault or negligence, depending on whether the action is intentional or whether due diligence has not been exercised. However, there are also cases in which the law attributes liability directly or objectively as a consequence of a duty.
On the other hand, it will not be possible to impute the non-performance of suppliers in the event of an act of God or force majeure.
Administration or management of supply contracts
Good administration or management of supply contracts requires first of all that all relationships with suppliers are supported by contracts that are a guarantee of a good business relationship and are established for the benefit of both parties. The contract must specify the requirements of the products or services supplied, the delivery conditions, the price and the method of payment; it is advisable to establish penalties in the event that certain types of agreed conditions are not met, if applicable.
Thus, a contract makes it possible to reduce risks, and to keep in mind essential circumstances in the legal relationship such as prices, or delivery dates. In the event of possible non-compliance by suppliers, it will be sufficient to verify the contract to determine the possible consequences.
On the other hand, the administration or management of supply contracts also requires monitoring them, establishing fluid communication with suppliers to avoid misunderstandings and regular meetings to eliminate surprises.
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