Legal Question in Business Law in California

This question is difficult to answer without knowing the terms of the contracts between the clients and you, on the one hand, and between you and the printer, on the other. It is a general rule of the commercial code that the buyer of goods is entitled to a "perfect tender," i.e., that the product as delivered must conform exactly to the specification or sample. The buyer has a right to reject nonconforming goods and is under no obligation to pay for them. There are some limitations on when risk passes, when the inspection must be made, when and how the rejection must be communicated, and the seller has some rights to correct deficiencies and re-tender the goods if it can be done within a reasonable time.

Here, things are complicated by what appears to be a merging together of the two client orders into one in the thinking of the printer. Do I understand this correctly?

The analytical problem here is that there are really (I think) four parties, four contracts and four contractual relationships. The parties are YOU, P (the printer), and two clients, X and Y. There are four contracts: 1. YOU and X; 2 YOU and Y; 3. You and P for X's books; and 4. You and P for Y's books. Jurisdiction for #3 and #4 will very likely be in California; not enough info. to tell about the others. Each of the four contracts needs to be analyzed separately, in view of its terms and the provisions of the Uniform Commercial Code, to see whether and when a breach occurred, who is the breaching party, and what remedies were or are available.

Generally speaking, a supplier cannot fail to deliver paid-for goods on Order A because the customer is behind in making payment on Order B. The supplier's correct approach is to stop taking orders from the customer, not to hold paid-for goods hostage. This general rule can be modified by contract, of course, or perhaps even by trade custom in a particular industry, but I think that would be unusual.

Your client already has a judgment? It was your opportunity to counter sue the printer then. Is it a default judgment? If so perhaps it may be set asside. Contact me directly.