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Jo C.
Jo C., Barrister
Category: Law
Satisfied Customers: 70204
Experience:  Over 5 years in practice
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I am a supplier of goods and terminated the agreement with

Customer Question

I am a supplier of goods and terminated the agreement with my distributor, mainly because I was worried about the way the distributor wanted to sell our goods which was contrary to what we agreed on verbally. Now the distributor wants to claim for losses as a result of the termination of the agreement. What shall I do?
Submitted: 2 years ago.
Category: Law
Expert:  Jo C. replied 2 years ago.
Hi.
Thank you for your question. My name is ***** ***** I will try to help with this.
What did you agree and what is the nature of the breach?
Customer: replied 2 years ago.

Good afternoon Jo: we design and produce hotel vouchers which we sell business to business. We entered into agreement with a company who wanted to package the vouchers with other products. We then discovered that the company wanted to start selling the vouchers as a stand alone product, which was contrary what we discussed verbally. Hence the decision to terminate the agreement.

Expert:  Jo C. replied 2 years ago.
OK. Were the other products yours?
What is the loss to you if he sells stand alone?
Customer: replied 2 years ago.

No, the other products should have come from other suppliers. I would have experienced problems with other distributors (to the extent that I would have lost business) as our agreement/s with them states that the product can not be sold directly to consumers as a stand alone product.

Expert:  Jo C. replied 2 years ago.
OK.
You could argue that their actions constitute a repudiatory breach of your contract allowing you to cancel. They will probably argue that it does not but if the facts are as you say and you can satisfy a court that it would have given others a claim against you if this happened then probably a Judge would accept it is a material breach striking at the heart of the contract.
If so, you are not liable for anything at all.
If you lose on that point then you are in breach but they only have a claim for their actual losses which would be lost profits. They are not going to get consequential losses realistically.
Can I clarify anything for you?
Jo
Customer: replied 2 years ago.

Can you please explain in more details what you mean with "If you lose on that point then you are in breach but they only have a claim for their actual losses which would be lost profits."?

They didn't even have a product but were in the process of putting a product together. That's what they told us when we signed the agreement Mid February. When they placed their first order Mid April we found out that we were the only supplier on their website (basically they took used our website contents and copied it into their own website). So I guess my question is, how are "lost profits" defined?

Expert:  Jo C. replied 2 years ago.
The sum of the profit they can show they would have received if the contract had been properly performed.
It is usually a math calculation.
Customer: replied 2 years ago.

And for which duration can they claim the loss of profits? I guess this is for the court to decide ...

Expert:  Jo C. replied 2 years ago.
Was there any end to the contract?
Was there a scope for either side to terminate? It cannot have been open ended?
Customer: replied 2 years ago.
Initial duration was for 12 months.
Expert:  Jo C. replied 2 years ago.
Is there any scope to give notice during that time?
Customer: replied 2 years ago.
Unfortunately not, I realise that I may be in breach of having terminated the agreement without reason, but all I was doing was protecting the interests of our company. We have worked hard to come this far. One thing I only found out now is that the company is insolvent which was never mentioned to us.
Expert:  Jo C. replied 2 years ago.
No, the insolvency issue depends. In principle they shouldn't be trading but that doesn't necessarily mean they can't enforce contracts. It depends.
They are not going to get lost profits for a year. Probably it would turn into lost profits for a month or thereabouts.
Jo C. and other Law Specialists are ready to help you
Customer: replied 2 years ago.
Thank you so much. I realise that I should have acted different, anyway, I have learnt my lesson.
Expert:  Jo C. replied 2 years ago.
No problem.
All the best.