A supplier may miss a deadline or delivery from time to time. When the same people repeatedly falls behind schedule, however, the disruption can affect production, customer commitments and revenue. Understanding the contract and your remedies under Texas law can help you respond while protecting your business’s interests.
Protecting rights and operations
You can begin by documenting each missed delivery, defective shipment and unfulfilled promise. Contracts for the sale of goods in Texas generally fall under the state’s version of the Uniform Commercial Code. If you receive defective goods, you must notify the seller within a reasonable time after discovering the problem or you might lose the right to pursue a remedy.
Remaining silent may create another issue. If you repeatedly accept late or defective shipments without objection, the supplier can argue that you waived strict compliance with the agreement.
Matching remedies to conduct
A single defective shipment may call for a cure demand, giving the supplier an opportunity to replace the goods or correct the problem. When failures continue, however, your response should address the pattern rather than only the latest shipment.
If the supplier’s track record gives you reasonable grounds to doubt future performance, you may send a written demand for adequate assurance. You can also suspend performance for which you have not received the agreed return when doing so is commercially reasonable.
The supplier then has a reasonable time, which cannot exceed 30 days, to provide assurance that is adequate under the circumstances. If it does not respond appropriately, the law treats that failure as a repudiation, allowing you to pursue available remedies without waiting for the next breach.
For agreements involving separate deliveries, you can reject an installment if its defect affects the items value and cannot be cured. Treating the entire contract as breached generally requires a nonconformity or default involving one or more installments that substantially impairs the value of the contract as a whole.
Pursuing legal enforcement
When notices, assurance demands and efforts to revise the agreement do not resolve the problem, you may file a breach-of-contract lawsuit. You can seek the difference between the contract price and the reasonable cost of buying replacement goods, known as cover, along with related expenses.
Texas law can allow a prevailing business to recover reasonable attorney fees. To preserve that request, you generally must present the claim to the supplier, meaning demand payment, and allow at least 30 days to pass without payment. A fee provision in the contract may change this result.
For the sale of goods, you generally have four years from the breach to file a claim, even if you discover the problem later. The agreement might shorten that period to no less than one year. Before filing, review the dispute resolution clause because it requires mediation or arbitration or specify where the case must proceed.