Missing The Minimum: What Happens When A Distributor Falls Short?

In last month’s blog [here], we considered the different forms that minimum purchase obligations can take. But a stated minimum provides little unless the agreement also explains how it is measured and enforced.

What counts towards the minimum?

A requirement to purchase £1m products a year may appear clear. However, in practice, it leaves several questions unanswered.

Does a purchase count when the supplier accepts the order or only when the invoice is paid? How should returns, cancellations, and samples be treated?

What if the supplier cannot supply?

A minimum purchase obligation should not be considered in isolation from the supplier’s obligations.

Circumstances can be such as to enable the distributor to argue that it missed the minimum because products were unavailable, deliveries were late, or a product line was withdrawn. Difficult questions can arise if the agreement sets an absolute minimum but does not explain what happens when the supplier is unable to meet orders.