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Chargebacks could deter vendor contract violations

Running a successful business often means making valuable connections with other people and companies. In some cases, business owners may need to work with outside vendors in order to obtain products, especially in retail settings, or to procure supplies for manufacturing. Of course, if you work with outside parties, you certainly want to ensure that they hold up their side of the arrangement.

Because working with another person or company is a business arrangement, it is important that you create contracts that detail the parameters of that arrangement. These contracts can be especially useful in the event that a vendor does not stick to the terms.

Using chargebacks

It is becoming more common for retailers and other types of businesses to utilize chargebacks when it comes to working with vendors. Chargebacks refer to financial penalties that vendors could face from the companies with which they work in the event that the vendors do not meet the terms of the arrangement. Having such penalties in place can help companies because it may deter vendors from making mistakes that could, in turn, harm the companies.

Some reasons for chargebacks include the following:

  • Late or inaccurate advanced shipping notifications
  • Late or early deliveries
  • Incorrect paperwork or labels
  • Incorrect packing
  • Using the wrong carrier
  • Violating order fill rates
  • Shipping to the wrong location

Any of these issues could cause considerable setbacks for your company. For instance, if a delivery is late or sent to the wrong location, you may miss out on making sales because your establishment ran out of the product. Issuing penalties like chargebacks could lessen the likelihood of such issues happening in the future.

Taking additional action

While chargebacks could certainly act as a useful deterrent, they may not be enough if a vendor significantly violates a contractual agreement. Hopefully, you created a solid, legally binding contract so that you and your vendor understood the terms of the arrangement and the expectations involved.

If you believe that a vendor breached a contract, you may need to explore your legal options for addressing the situation. You undoubtedly do not want your company to suffer due to the wrongful actions of others, and it may be in your company's best interest for you to take legal action. Discussing your options for addressing contract violations with a Kansas attorney could prove useful during this time.

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