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Breach of Contract Disputes Between Companies and Suppliers

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If the Midwest is the breadbasket of America, then California is America’s salad bowl.  The sunny climate is suitable for growing almost any kind of fruit or vegetable, such that the Golden State has become virtually synonymous with healthy eating.  Restaurants across the world routinely name low fat or plant-based menu items after California or after various locations in our state.  From a corporate law perspective, this means that many businesses, from supermarkets to restaurants to manufacturers of prepared foods, have business contracts with the California farms that supply their fresh ingredients.  If the farm stops providing produce to the company, or if the company stops paying, the other party can file a breach of contract lawsuit.  A Los Angeles business litigation lawyer can help you if you are a party to a legal dispute between a farm and a food and beverage business.

Put It in Writing, Even With Longtime Business Associates

Decades ago, a farm that grows a certain sought-after vegetable signed a contract to provide the vegetables to a company that manufactures non-perishable foods in which this vegetable is a main ingredient.  As the manufactured product grew in popularity, so did the demand for the vegetable.  For the first ten years, the parties signed new contracts for a bigger supply each year, but eventually, the parties built up enough trust that they would just make verbal agreements about order quantities and payment.  As one might predict, this eventually led to a misunderstanding about whether each of the parties had kept its promise.  Eventually, the parties severed their relationship and ended up facing each other in court.

The court eventually awarded compensatory and punitive damages to one of the parties, but business litigation is not quick or cheap.  This led to interruptions in the manufacture of a favorite grocery item, leaving customers disappointed as they found their favorite shelf in the supermarket empty week after week.  The moral of the story is that, if you want to keep your customers happy, put all of your agreements with suppliers in writing.

What Can Go Wrong in Contracts With Farms?

Farms are even more vulnerable than other businesses to the whims of Mother Nature.  Droughts, wildfires, and intense storms can destroy crops and cause you to lose an entire year of production.  From this perspective farms are the perfect candidates for force majeure clauses in business contracts.  A force majeure clause says that the parties are not liable for breach of contract if their non-performance of contractual obligations is due to force majeure events, which are major adverse events beyond the control of the parties.  Force majeure events include typhoons, earthquakes, and other natural disasters.

Speak With a Los Angeles Business Dispute Lawyer

A Los Angeles business litigation lawyer can help you if you are involved in a dispute with a company that supplies ingredients for your food and beverage business.  Contact Obagi Law Group, P.C. in Los Angeles, California to discuss your situation or call 424-284-2401.

Sources:

cases.justia.com/california/court-of-appeal/2021-b303096.pdf?ts=1627407095

cnbc.com/2023/08/19/how-did-the-huy-fong-foods-sriracha-shortage-happen.html

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