Indian contract act
Nitish Joshi
(Querist) 01 August 2013
This query is : Resolved
Dear Sir,
Our client has placed a Purchase Order with a Firm aggregating approx Rs. 80 Lacs for supply of material.
But in the mean time they came in touch with another supplier who is offering lower rates.
supplier has manufactured the material as per purchase order. Our client have received a email from supplier to lift the material from their factory.
But now our client wants to cancel the purchase order and refusing to get the delivery of material.
I want to know whether can we cancel the purchase order?
Can that supplier claim the compensation for cancellation of purchase order?
And if he can claim compensation then what will be the amount of compensation? Amount of purchase order as already told is Rs. 80 Lacs.
Their was no such clause for compensation in purchase order or in supplier's offer.
Please suggest the best course of action to over come the situation.
Kumar Doab
(Expert) 01 August 2013
It is not a legal advice. However it was felt it is prudent to post it.
Although it is up to you to exercise the most suitable option as deemed fit at your end.
The manufacturer that has manufactured the material worth huge amounts as per purchase order may be destroyed if order is cancelled.
Your establishment may be viewed as a violator of its own committement in the industry and trade circle.
The sufferer may adopt legal recourse.
You may try by negotiating to get some discount and may offer full and early payment. The manufacturer may agree.
The burden of litigation would be avoided.
In business the goodwill matters.
Rest is up to you.
Valuable advice of learned experts matters.
malipeddi jaggarao
(Expert) 02 August 2013
I agree with Mr.Kumar's advice. Start re-negotiation and ask for reduction in the price showing the offer of other party. If you do not negotiate he will definitely resort to legal and seek compensation. The amount will depend upon the loss he incurs in the deal. If he can prove that the raw material is purchased for executing the purchase order the it would be heavy.
prabhakar singh
(Expert) 02 August 2013
The negotiation between the two has shaped as an agreement enforceable at law and party at breach would be liable to pay compensate for it's breach as per actual damages caused since there is no pre decided damages fixed which serves the purpose of maxima.
Mr.Kumar Doab is right.It does not sound like a businessman.Order should have been placed after due deligence about prices prevelant.
Some time businesses have strong rivalry.May be supplier quoting the lower price has some that kind of intention.May be he supplies you some inferior quality.
Prices are function of demand and their momentum fluctuate every minute,then what does it mean?should people avoid commitments made?Can any business survive
that way?or can any commitment go that way.
