My supplier is changing the agreed price for services – what do I do?

Following on from the first blog of the series – you have tidied up the MSA, your supplier now has an obligation to supply the services. Fantastic, that’s it all sorted, right?

Well, maybe not.

Let’s take our hypothetical scenario from blog 1 of this series. You hold up your Compulsion Clause as the answer to the dispute. Nemo Limited will not budge. £25,000 per week is the price and unless you meet that, you will not be able to rent the boat. Without the boat, you will be unable to fulfill your order with Shark Siberia Limited. You threaten to sue. No response, Nemo Limited will not budge.

Reality sets in, your goods have to be with Shark Siberia Limited in less than a week. The journey takes four days. You have three days to find a solution. Your contract with Shark Siberia Limited is worth £100,000 per week. If you default, they will look elsewhere. You will be deemed unreliable. You cannot physically force Nemo Limited to give you the boat you require.

What is the solution?

First things first, identify the need. You need a form of transport to get your goods to Siberia and you need it within the next three days.

Narrow the parameters, air is too expensive. Boat it is.

You review the open market. Due to inflation, the going rate for the required boat is now well above £15,000 you originally agreed with Nemo Limited. There are other boat suppliers willing to do a deal at £22,000 – but you have never used them. The reviews are not great.

The key questions to ask yourself are “what am I risking?” and “at what cost?” If the goods go missing, or are delayed it has the same effect on your relations with Shark Siberia Limited as if the goods had not been delivered at all. That’s no good and could result in the loss of a monumental customer. You need to find a solution.  The best strategy in this instance may actually be to negotiate with your original supplier, Nemo Limited. After all, you know what you are getting and can be safe in the knowledge that your goods will be delivered on time and in good condition.

This is where law meets business and the commercial reality is that in some circumstances, the market will dictate pricing. At Gilson Gray, we have advised on thousands of complex commercial negotiations. For advice on the risks of inflationary pricing to your business, and the reality of the situation please do not hesitate to contact Oliver Craig or Calum Crighton.