01 / 22 / 2015

Customer Demanded Discounts may be a Litigation Set Up

Whether it is because of your customer's current financial constraints or a claim that your business has delivered a nonconforming product or made a mistake in the item delivered, businesses are facing increasing requests to discount outstanding invoices. This may not be an issue for small items, but for large ticket items, this request directly affects the business’s bottom line. In this predicament, a business should consult with its business lawyer to determine whether a concession is warranted and, if so, how it should be structured.

When structuring any agreements, either upstream or downstream, with vendors or clients, it is imperative to work with your Houston business attorneys to ensure that any concession resolves every dispute between the parties.

Many times, a concession is requested only for financial reasons. At other times, a concession is requested or sought because issues have been raised about the quality or conformity of the product. Many businesses, on a large ticket item, will allow for a reduction in price to keep a customer happy without consulting with their business lawyers. The problem with this quick fix method is that there may have been underlying disputes that led to a request for the concession or discount in the first place.

Without obtaining a full, fair, and final resolution of the dispute, a business may very well wind up paying for the same mistake several times. For example, the business would initially pay because it has allowed for a discount on its invoice. It pays again if the customer decides to initiate a lawsuit over the mistake or non-conformity; specifically in the form of paying attorneys to defend against the claim. Third, if a business is found liable or settles with its customer over the alleged a mistake or nonconformity, the business winds up paying, in cash or credit, for its mistake or nonconformity. Fourth, if the claim is brought as a breach of contract or a Deceptive Trade Practices Act ("DTPA") claim, the business may also be forced to pay its customer’s attorney fees and costs, and may be subject to a trebling of damages under the DTPA.

A Houston business lawyer, such as those in the Vethan Law Firm, PC's Business Litigation Group, will be able to advise businesses about claims for concession and explore the potential downside of such claims. In any event, if a business decides to settle out a dispute early, a business lawyer should be structuring a resolution that protects the business against further liability.

It's an old but true adage that an ounce of prevention is worth a pound of cure. When faced with a request from your customer for a discount due to a mistake or nonconformity in a deliverable, we hope you speak with a business lawyer, such as those in the Vethan Law Firm, PC's business litigation group in Houston.

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