Stay in contact with each other in case of cancellation of orders in direct trading03 April 2020
At the moment, many orders are being cancelled in floriculture due to measures being taken all over the world to prevent the spread of the corona virus. As a result, consumers are fewer in the shops or governments sometimes prohibit the sale of flowers and plants. This means that worldwide our sales chain is suffering serious damage because floriculture products are made but not sold.
All costs for the grower or exporter?
In direct trade there are often long-term supply contracts, where the product is fully tailored to the wishes of the (end) customer. Such contracts are not without obligation: a grower has an obligation to deliver, a buyer has an obligation to purchase. It is not surprising that the exporter, out of his business interest, tries to get out of this by invoking force majeure.
- Suppose that the invocation of force majeure succeeds: are all the costs for the grower then? Usually the grower has already pre-financed a fair amount by growing the plants, up to and including the purchase of a printed grow pot with the name of the end customer on it. The grower, who knows that he can no longer sell the products due to the worldwide drop in demand, will then bear all the costs.
- Assuming that the claim of force majeure is unsuccessful: Are all costs then borne by the exporter? Usually exporters have weeks, sometimes months, of credit outstanding with their customers. In this case, the exporter, who also knows that he can no longer sell the products due to the worldwide loss of demand, will bear the costs.
Think up a proposal together
It is important to realise that if one of the parties or both parties consider going to court, a judge will assess the situation in terms of what the parties have agreed upon and what the intention was of the parties. In doing so, a judge naturally also considers what is reasonable and fair. He then wonders what would be the best solution for both parties together. If, in the above case, the grower and the exporter are before the court, there is a good chance that the court will ask them to mediate and come back with a proposal (accepted by both parties) about the division of the damage. But even without the intervention of a judge, this is the best way.
Try to avoid ending up in a trench war. At the start of a conflict, it is important that both parties safeguard their rights. So the exporter invokes force majeure and the grower rejects it. Both are shocked by the other party's reaction. You can keep this up endlessly: "No, I don't want to take away" and "Yes, you should take away", supported by arguments from both sides. If neither wants to take a step in the direction of the other party, you dig you both in, in your own trench. And in the end, you only have losers. One party has to pay and goes bankrupt, or never wants to do business with the other party again. The other party is happy that it ended well financially and that his company still exists, but is disappointed about the fact that a business relationship of many years ended in this way.
At the Order and Risk Advice (ORA) department, we are currently seeing trench wars developing. We advise you, on the one hand, to request understanding from the other party and, on the other hand, to have understanding for that other party as well. As a floriculture sector, we will have to face the crisis together. If you need help in the form of mediation, you can contact the ORA department via the Customer Contact Center (email email@example.com, or call +31 (0)88 789 89 89).