Supplier non-performance, such as shipping delays or partial delivery, can lead to multiple negative consequences, including supply chain disruptions, delayed operations, and material losses. In the current volatile business ecosystem, identifying breaches of contract early and taking steps to restore performance or claim compensation are essential parts of working with suppliers. Below, we discuss various types of supplier breaches, explore remedies available to companies in Singapore, and outline a step-by-step approach on what to do if your suppliers cannot perform.
Key Takeaways
- There are several different types of supplier breaches, including minor or partial breaches, material breaches, and anticipatory breaches, which may require a different approach to restore performance or claim compensation.
- Suppliers can claim relief under force majeure in Singapore only if force majeure clauses are expressly defined in the agreement.
- In case you experience a shipping delay or another type of contract breach in Singapore, you may benefit from engaging a business lawyer.
- An experienced commercial lawyer can review your supplier agreement, ensure all evidence is collected, have a notice served on the supplier, and support you during negotiations, alternative dispute resolution, or while pursuing your claim in court.
What Is Considered Supplier Non-Performance?
Depending on the nature of your business and supplier agreements, supplier non-performance can include defective goods, late or partial delivery, or complete failure to supply. Non-performance of a supplier agreement can trigger remedies, such as payment of damages or specific performance.
The main types of supplier breaches include:
- Minor breach. Also commonly referred to as an immaterial breach or partial breach, a minor breach occurs when a supplier fails to perform a non-essential part of the contract while performing their main obligations, for example, a short delay in delivery due to customs clearance.
- Anticipatory breach. This type of breach occurs when a supplier implies that they will not be able to perform their obligations according to the contract, which allows the affected party to seek early remedies. These could include situations when a supplier informs the client that they will do only a partial delivery.
- Material breach. As the name suggests, the material breach is the most serious type of non-performance where a supplier fails to perform a significant part of or the entire contract.
What Are the Remedies for Supplier Breach of Contract in Singapore?
When your operations are affected by a supplier breach, you can pursue various remedies depending on the type of breach and the wording of your contract.
Generally, there exist several paths to compensate for supplier breaches in Singapore:
- Unliquidated Damages: If you decide to claim compensation for a supplier breach in court, the judge may award unliquidated damages, which are usually based on the actual loss.
- Liquidated damages: These are a predetermined amount defined in the contract, paid by the supplier in case of their non-performance. Importantly, you should have a liquidated damages clause in the contract to claim this type of compensation.
- Specific Performance: In cases where monetary compensation isn’t adequate for the damages, for example, unique contracts, the court may order specific performance, compelling the defaulting supplier to fulfil a specific obligation.
- Termination: Lastly, a material breach may give the innocent party the right to terminate the contract. However, obligations accrued up to the date of termination usually remain enforceable, which allows the innocent party to claim compensation.
When Can Suppliers Claim Force Majeure or Frustration of Contract?
In Singapore, suppliers can claim force majeure as an excuse for partial or complete non-performance only if the contract includes an express force majeure clause that specifically covers the event in question. Since Singapore law does not contain blanket force majeure provisions, the courts interpret force majeure clauses strictly according to the wording of the agreement.
In the absence of force majeure clauses in your contract in Singapore, the supplier can resort to the relief under the doctrine of frustration of contracts, defined in the Frustrated Contracts Act. However, frustration of contracts can be claimed only in exceptional circumstances, which have a fundamental impact on the ability to perform the contract, for example, an “astronomical change in prices.”
Steps to Take When Supplier Is Not Performing
If your supplier is failing to fulfil their contractual obligations, it’s essential to act promptly to avoid supplier issues becoming yours and to set the trajectory for everything that comes next. While every situation is context-specific, the most common steps include:
Identifying What Is Failing
The first step is always to identify what the supplier is failing at, whether it is partial performance or delay. It is essential to determine whether the breach is partial or material, which will define the following course of action.
Reviewing Existing Supplier Contract
Supplier contract review is the next required step to identify supplier obligations and your remedies for their non-performance. This step also helps to check any requirements for notifications and the presence of force majeure clauses.
Collecting Evidence on Non-Performance
When you have a failing supplier, collecting evidence on non-performance, which includes original contracts, correspondence, delivery records, and other documentation, can help demonstrate supplier failure and support future claims.
Contacting Your Supplier
Contacting the supplier early allows you to raise the issue directly and explore a resolution. Sometimes, direct and effective communication helps resolve delays without formal legal steps. It is always recommended to have a written record of such communication for future reference.
Giving a Notice Requiring Performance
In case a supplier continues non-performance, a written notice requiring performance is usually the next step. Sending such a notice may be required by your contract with the supplier and generally expected by the courts.
Considering Alternative Dispute Resolution
If you have a dispute with a supplier after a breach of contract, mediation or arbitration may offer a more effective route than litigation. Importantly, the courts in Singapore generally expect the parties to explore alternatives to litigation before filing their claims.
How to Limit Your Risk Exposure from Supplier Non-Performance
If your supplier does not perform, acting quickly and ensuring that all legal requirements are met are important to minimise the damages and obtain compensation. Meanwhile, building resilience into your supply agreements helps safeguard your strong legal position before disputes arise.
Have a Legal Review for Supplier Contract
Engaging a business lawyer in Singapore for supplier contract review can help identify supplier liabilities, contract remedies, requirements for contractual notices, applicability of force majeure, and other related provisions. A corporate and commercial lawyer can help identify gaps in your supplier contract before they become costly problems and minimise your risk exposure.
Monitor for Breaches and Enforce the Contract
Monitoring supplier performance against the agreed contract terms and reacting to breaches promptly can help track issues early before they escalate. Effective communication with suppliers gives a clear signal that breaches carry real legal consequences and helps minimise non-performance.
Set the Legal Processes in Place for Supplier Breaches
Having clear internal procedures for handling supplier breaches helps ensure prompt reaction to all types of non-performance. Involving commercial and contract lawyers can help ensure timely notices, keep documentary evidence in check, and ensure that all legal requirements are met to pursue your claims.
When to Seek Advice from a Singapore Business Lawyer?
Usually, it’s advisable to consult a business lawyer as soon as you have a supply chain disruption, shipping delay, or any breach of contract in Singapore. At the same time, having a legal review of your supplier agreement at regular intervals and engaging a lawyer on a regular basis can help minimise your risks and react promptly when the breach arises. For more information on what to do if your supplier cannot perform or for obtaining legal advice for shipping delays in Singapore, please don’t hesitate to contact IRB Law’s contract and commercial lawyers.
FAQs
What should a business do first when a supplier says they cannot perform?
Usually, when you have a supplier who fails to fulfil their obligations, the first step is to review your agreement with them, collect all related evidence, including documents and written communication, and discuss how the supplier can correct or compensate for the breach. Involving a commercial and contract lawyer can help ensure a professional contract review and support you in pursuing your claim.
Does a supplier’s failure to perform count as a breach of contract?
Depending on the type of non-performance, a supplier’s failure to perform may count as a partial breach or a material breach, which usually means complete non-performance. While partial breaches usually have minor consequences, a material breach may require involving a law firm for contract review, sending notices, alternative dispute resolution, or pursuing your claim in court.
Can a business terminate the contract if the supplier misses the deadline?
Generally, you can terminate your supplier agreement if the contract expressly allows it for a particular case, for example, for missing the deadline for delivery. Meanwhile, a missed date of delivery alone usually does not automatically entitle you to terminate the agreement.
What evidence should I preserve when a supplier cannot perform?
Usually, you may need to collect all documents and communication, including the supplier agreement, emails and messages, copies of invoices, as well as shipping documents. When you file your claim in court, you may also need proof of sending a notice to the supplier as well as evidence that you made efforts to resolve the issue through negotiations or mediation.
How long can a business sue for breach of contract in Singapore?
Under Singapore’s Limitation Act 1959, you can usually pursue your claim in court within six years from the date of breach. This period may be shorter if your supplier agreement sets another time limit on how long you have to file a lawsuit.
