Avoid Getting Caught in the Middle

Businesses that are reliant on contractors, suppliers, experts and vendors to complete and deliver goods and services to their upstream customers or clients can face unique challenges. These challenges, however, can quickly multiply when contractual obligations the business owes to its upstream customers or clients aren’t harmonized with the obligations owed to the business by its downstream relationships. There are, however, ready solutions that can be applied to help control this type of risk.

The Problem, Illustrated

COVID-19 has tested almost every industry. A lot of businesses, from furniture makers, to pharmaceutical drug manufacturers and electronics suppliers, have suffered downstream suppliers and vendors declaring force majeure events or breaching their contractual obligations because of a lack of materials or labor. And a lot of these businesses have been forced into breaching their own upstream contractual obligations when their downstream relationships failed to deliver what they needed, when they needed it. 

But a business doesn’t need an international pandemic to get into trouble. The just-in-time inventory systems and tight delivery deadlines on which modern economies depend mean that hiccoughs and failures in downstream vendor and supplier relationships can quickly multiply up the chain. And problems frequently magnify when the performance of a downstream relationship doesn’t match what a business must produce for an upstream relationship, whether in quality or in time. But, there are solutions.

Thinking About Your Business Holistically

A once-in-a-century pandemic presents unique contractual challenges. But the need to reconcile upstream and downstream contracts will always be important, regardless the circumstance. As we previously wrote here, here and here, understanding the position of your company within the larger context of what it does, how it does it, where it does it, and when it does it, is a good starting point. Just as each company and its position within an industry is unique, so are the best practices for optimizing your business’ contracts. Industry-specific legal guidance can be a crucial resource for midstream entities and middlemen.

Baker Jenner LLLP is dedicated to elevating high-level businesses that operate in complex, highly regulated markets. A cookie-cutter approach to resolving your company’s legal needs is not sufficient. Our team provides personalized and focused representation. Contact us for an initial strategy session.

The following two tabs change content below.

Baker Jenner LLLP

Baker Jenner LLLP is a business solutions law firm. We partner with clients to achieve their goals while managing transactional, regulatory, and legal risks.

Latest posts by Baker Jenner LLLP (see all)