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Alex J.
Alex J., Solicitor
Category: Law
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Experience:  Solicitors 2 years plus PQE
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There is a termination clause in a buyers purchase order which

Resolved Question:

There is a termination clause in a buyers purchase order which states the following.
The Buyer shall have the right at any time and for any reason to terminate the contract in whole or in part by giving the seller no less than 30 days written notice, in which event the buyer's sole liability shall be to pay to the seller the price for the goods or services in respect of which it has exercised its rights of cancellation , less the sellers net saving of cost arising from cancellation.
The order is for bespoke manufactured products and the manufacturer was about 30% through the process, there is no breach from the manufacturer the buyers client changed their mind and no longer required the goods.
Are you able to advise what the manufacture's entitlements are under the termination clause stated above
Thanks Malcolm Birchwood 07500 119436
Submitted: 2 years ago.
Category: Law
Expert:  Alex J. replied 2 years ago.
Hi,
Thank you for your question and welcome.
My name is ***** ***** I will assist you.
How much is the total value of the "price of the goods or services" in respect of the which the buyer has exercised his right of cancellation?
If the seller stops the manufacturing process now how much money will the seller have lost relative to if it had completed the whole process? Essentially how much has it cost the seller to complete 30% of the works and has the seller committed any expense beyond 30% of the process?
Kind regards
AJ
Customer: replied 2 years ago.

Hi AJ

The order is for £241,155.80 exc VAT I have calculated the seller has lost £149,575.85 which is made up of works completed, raw materials received and unable to return, abortive labour costs and lost overhead recovery. This includes the 30% works completed and the sellers committed expenses

Thank

Malcolm

Expert:  Alex J. replied 2 years ago.
Hi,
Thank you.
The key phrase here is the following:
"the buyer's sole liability shall be to pay to the seller the price for the goods or services in respect of which it has exercised its rights of cancellation , less the sellers net saving of cost arising from cancellation."
Therefore we need to determine in your contract what the exact description of the goods or services were?
Can any of the £149k be mitigated in anyway? I.e raw materials sold - employees redeployed to other projects?
Kind regards
AJ
Customer: replied 2 years ago.

AJ

my calculations resulting in the £149k allow for the resale of raw materials. I spoke to my client about re deployment of labour yesterday and he says it is limited as he is unable to pull forward into the factory long term secured orders therefore he is scratching with bits and pieces and doing a lot of in house maintenance the order made up most of the manufacturers October and November turnover.

Thanks

Malcolm

Expert:  Alex J. replied 2 years ago.
Hi,
Thank you.
The labour costs are potentially a loss you will have to bare. The buyer's liability is limited to goods and services provided up to this stage. Therefore the onus is on your client to prove:
1. £149k is a payment directly related to goods and services - that is why you need to look at the description of goods and services and see if they describe labour as a service?
2. How they have mitigated their losses to come to a figure of £149k.
If this client still will not pay then you will have a high court claim against them.
Things like pure economic loss, loss of opportunity or loss of good, your client will not be able to claim these.
As a starting point what has the buyer admitted to owing?
Kind regards
AJ
Customer: replied 2 years ago.

Alex

Thanks your assistance has been a great help I am sure I will be in touch again in the future

kind regards

MalcolmSmile

Expert:  Alex J. replied 2 years ago.
Hi,
Thank you.
As the buyer has exercised their right to terminate, I would either:
1. Present them with an invoice and let them rebut it; or
2. Invite them to admit what they owe.
Please do not hesitate to contact me if I can assist any further.
Kind regards
AJ
Alex J., Solicitor
Category: Law
Satisfied Customers: 3519
Experience: Solicitors 2 years plus PQE
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