Legal Question in Business Law in New York

Re: Loss of Profits Caused by Subcontractor's Breach

There are too many unanswered questions to give a highly substantive answer: when did you discover the defect? How did you discover it? Did, in fact, your customer discover it? Did you reject the initial shipment as non-conforming? What does your contract with the sub-contractor say about liability and did it disclaim warranties?

You need to answer these questions as this is a UCC issue and all these questions go to burdens of proof and proper action by your company.

You don't have to call me. Good luck.

Re: Loss of Profits Caused by Subcontractor's Breach

How were the items defective? When/how did you know? If the sub gave you inferior goods, and you had no way of knowing until later, you should be able to defend the claim of the sub based on noncomformity of goods and breach of contract. As far as the loss of the gov't contract, it is possible that the sub could be liable but it depends on a number of things and the forseeability of the loss of the gov't contract when the defective goods were supplied.

Re: Loss of Profits Caused by Subcontractor's Breach

Any foreseeable (anticipated) loss resulting from the failure of the seller to meet your requirements and needs for which you contracted (as with defective parts) is recoverable. You must prove the defect (not merely the fact that the government canceled the contract). You must prove that the defect led to the cancellation of the contract. Proof of the defect, communication with the subcontractor regarding same and a return of the effective components should be enough to cancel the obligation to pay for the defective components. This being said, there is no guarantee of success in any litigation. Everything comes down to a matter of evidence - not truth! Much will also depend upon the language of your written contract, or in the absence of such a contract, the written communications between you and the subcontractor. Depending upon the circumstances, oral communications may also be admitted into evidence.

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Re: Loss of Profits Caused by Subcontractor's Breach

In theory you have valid defenses. However, you have made an assumption that the defect was the cause for the termination. That will need to be deterined. As to your claim for lost profits, before starting an action against the subcontractor, you need to determine why the subcontractor submitted a defective product and perhaps even more importantly, if you win a judgment against the subcontractor, will you be able to collect. Winning an empty judgment is an expensive exercise.

Re: Loss of Profits Caused by Subcontractor's Breach

Let's be realistic...your questions is so broad based to defy an answer to specifics, but then this a bulletin board service. That being said, there may be UCC issues that apply, the timing of all the actions of the parties, the written agreements: all of these items factor into any type of response, either general or specific, so for anyone to give you any answers would be doing your company a disservice as to how to proceed.

Call if you'd like..or not. But you WILL need to speak with an attorney, and not expect an answer with 10 minutes either. There appear to many overlapping and intertwined issues.

Good of Luck

RRG