Lubecka.Law Blog

Delay in delivery and its financial consequences

Case study

Is it possible for Adam to hold the contractor financially responsible for a late delay?

Adam and the American manufacturer concluded an exclusive distribution agreement for packaging equipment in Poland. According to it, the American company was to deliver a certain amount of equipment based on orders placed by Adam. The orders specified, for example, the date of equipment delivery agreed between the parties.

Adam concluded a number of contracts for the sale of packaging equipment with end customers. The delivery dates were adjusted to the delivery schedule agreed with the American manufacturer. To put it simply, the Polish distributor set the delivery dates of the equipment to its customers, taking into account the time of delivery stated by the American business partner.

Among indicated contracts, Adam also concluded a contract for the supply of packaging equipment worth 1 million PLN. The agreement specified the delivery date for the ordered equipment. At the same time, the contract imposed an obligation on Adam to pay a contractual penalty in case of delay in the delivery, as well as a supplementary compensation, if the agreed contractual penalty did not cover the full amount of the claimed damages. The agreement also included the contractual penalty and potential supplementary compensation in case of withdrawal from the contract due to Adam’s fault.

Right after concluding the above mentioned contract with the end customer, satisfied Adam placed an order of equipment from an American manufacturer. The delivery date was agreed to be one month before the deadline resulting from the agreement concluded by Adam with the end customer. The order was accepted.

Just before the deadline with the end customer, Adam received information from the American manufacturer that the order would not be fulfilled on time and the earliest possible time for its realization would be six months. It was justified by the lack of availability of components necessary for the production of the device.

Adam immediately passed on this information to the Polish contractor who was supposed to buy equipment worth 1 million PLN from him. The buyer withdrew from the contract, stating that in this situation it had lost its economic significance for him. The distributor was charged with the obligation to pay a contractual penalty in the amount agreed in the contract.

Who is financially responsible for this event?

The following questions can be raised based on the defined factual situation:

  • Can Adam hold the American manufacturer liable for payment or somehow engage him in the financial responsibility for the consequences of the delayed delivery?
  • What happens to the order placed with the American manufacturer in such a situation? Is it still binding? Can the Polish entrepreneur withdraw from it?
  • What regulations will apply in this matter?
  • Will the dispute be resolved in Poland, or is legal assistance required in the state of the American manufacturer?

The agreement is crucial to answer all those questions

There is no one explanation to the above case, and their fundamental part will depend on the AGREEMENT BETWEEN THE PARTIES and the established APPLICABLE LAW. The contract is valid and has an impact on the possibility of realizing the parties’ rights related to the conducted business cooperation, as well as its financial consequences. It is worth taking the time to negotiate provisions in order to focus on running the business in the future.

Joanna Lubecka
attorney

02

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