In an unusual step, high street clothes’ retailer New Look has told its suppliers that it will not pay any of their invoices due for the foreseeable future; and, even more unusually, they are free to come and collect the items they have supplied.
New Look’s move is unusual because a refusal to pay is generally accompanied by a refusal to surrender the goods supplied, thus sparking a battle over the retention of title clause. The question for New Look’s suppliers is how to respond to this.
If you are a supplier for New Look you may decide that in the current market climate you do not want the supplies back – they may be out of season and something you cannot sell in the foreseeable future, you may have logistical difficulties collecting them. or you may simply only be interested in cash.
Traditionally the law requires a party to try to mitigate its loss when seeking money damages; however, is that even possible at the moment?
With the general shutdown, could New Look’s suppliers actually even attempt to sell these goods? Would it be permissible for a supplier to argue they cannot mitigate their loss, they cannot sell the goods, and neither are they obliged to collect them and try to resell them?
As UK fashion retailers, and similar markets, see sales fall off a cliff, with the likes of Debenhams and Cath Kidston announcing their intention to call in administrators, suppliers to New Look and other similar companies are placed in a difficult position.
Orthodoxy might say don’t damage a relationship with a buyer of your goods; and the best course of action will always depend upon the exact terms set out in a contract and the relationships between the parties. Some future sales and cashflow might be good to have on your books, but as the number of administrations look set to grow, with their ability to recover or obtain goods; and with Insolvency Practitioners’ fees being paid first; the risk of being the party left without having pursued a claim having either recovered goods it can resell; forced performance of services or received some payment due, continues to grow. Doing nothing and waiting for business to return to normal increasingly seems a risky strategy.
It seems clear that if a business wants to secure its future it needs to be proactive, taking steps to pursue any contractual entitlements, or other claims, as soon as possible and either securing some form of payment; securing such supply as it needs or some other remedy before it is too late. That is particularly true for those lower down the supply chain who are likely to see a massive fall in orders and future business if stock is held over for the future by end retailers.
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