Question

Topic: Strategy

Cancelling Order Due To Raw Material Price Increas

Posted by santosha2512 on 12/5/2017 at 12:33 AM ET 25 Points
Dear Sir ,
we confirmed an order from customer with agreed price and credit terms i.e. 90 days but due to sudden increase in raw material prices we are not able to sell product at agreed prices and payment terms due to negative margin.
As we requested to cancel an order or give price increase , customer refused and asked to send the material at agreed prices . Could you advise what we should do in this situation ? Is there any legal impact if we do not agree for order ?
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RESPONSES

  • Posted by mgoodman on 12/5/2017 at 1:28 PM Accepted
    My opinion is that you should honor your order confirmation and send the order at the agreed price. If that means you lose money on the transaction, that's the cost of doing business.

    Next time be sure to note when quoting the price that the price is subject to change if there is a significant increase in raw material prices. (Customer will have the option to cancel the order or pay the increase.)

    As for the legal impact, you will need to contact an attorney. I am not an attorney and do not offer legal advice.
  • Posted by Peter (henna gaijin) on 12/7/2017 at 11:17 PM Accepted
    Everything varies based on the laws and norms of your local country, which may be different than where the people who respond to your question are located at.

    But, that said, I agree with Mgoodman. The order you have is a contract to provide a certain item at a certain price at a certain time. This is an agreement between you and the customer and should be upheld. In many countries, that customer could take you to court and force you to hold up your end of the contract. Even if that wouldn't happen in your case, not performing on the contract will be a blemish on your firm's reputation.
  • Posted by Shelley Ryan on 1/23/2018 at 5:20 PM Moderator
    Hi Everyone,

    I am closing this question since there hasn't been much recent activity.

    Thanks for participating!

    Shelley
    MarketingProfs
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