What should an innocent party do if they are looking to take action against a late paying customer without breaching the contract itself?
A Late Payment
In the recent case of Medina Dairy Ltd v Nampak Plastics Europe, Nampak supplied Medina with bottles under a commercial contract. The contract provided for Nampak to have rights to suspend and/or terminate the contract if Medina was late in paying and after following a formal notice procedure. Medina was late in paying a substantial amount of money, and Nampak threatened Medina with a suspension of supplies, unless Nampak agreed to new payment terms and a new price.
The High Court awarded an injunction to stop Nampak acting in this way. It had rights under the contract to suspend or terminate, but it should not have tried to impose new terms. Any new terms would need the agreement of both parties.
Follow the Contractual Process
Although Nampak had felt wronged in this case, it should have acted according to the contractual rights to suspend or terminate. Any innocent party needs to be sure to follow the contractual process, or if it wants additional rights, such as to change the payment terms or pricing in the event of a contractual breach by the other party, these rights need to be included in the contract when it is originally drafted.
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