When a supplier fails to deliver, the buyer’s options are governed by the contract and by the commercial code.
Demand adequate assurance. Where reasonable grounds for insecurity arise, a written demand suspends the buyer’s own performance pending a response, and failure to respond within a reasonable time is repudiation. This is the first step and it is under-used.
Cover. Purchase substitute goods in good faith and without unreasonable delay, and recover the difference between the cover price and the contract price, plus incidental and consequential damages less expenses saved. Cover must be documented contemporaneously.
Market damages as an alternative where cover is not made.
Rejection and revocation of acceptance for non-conforming goods, with notice requirements and time limits that are strictly applied.
Force majeure and impracticability as the supplier’s defence, and whether increased cost qualifies.
Allocation. A supplier facing shortage may allocate among customers in a fair and reasonable manner with notice, and buyers should assess whether the allocation actually is.
Practical steps. Document every communication; preserve the record of attempts to source alternatives; assess whether the failure triggers obligations to the buyer’s own customers; and review insurance for contingent coverage.