Is it legal for a customer to take unathorized credits off pmt to manufacturer without authorization or supplying required documentation

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Is it legal for a customer to take unathorized credits off pmt to manufacturer without authorization or supplying required documentation

We have a customer who is always deducting random amount in credits without our knowledge or authorization. They refuse to provide proof of many of the deductions/credits taken. We have asked them to stop that practice immediately and that all credits must be issued by our company. And often times, this company will take credits a year after the parts were received. We are manufacturing in PA, they are a distributing in IL. What can be done to stop them from doing this? The credits this year have soared into the 10,000.00.

Asked on August 17, 2017 under Business Law, Pennsylvania

Answers:

SJZ, Member, New York Bar / FreeAdvice Contributing Attorney

Answered 3 years ago | Contributor

No, it is not legal: one party to a transaction may not unilaterally (without the other party's consent) take credits or otherwise reduce what they will pay. Legally, you can them for breach of contract (for the violating the terms of the sale, whether those terms were written, oral, or a mixture of both) for the money. Of course, whether it's worth suing them depends on how good a customer they are otherwise, since if you sue them, you will likely lose them as a customer. If they do $40k business with you a year, but take $10k+ in credits, likely seriously impacting your bottom line, you probably don't want them and should likely sue for the money to which you are entitled. But if they do $200k+ per year and take $10k, or 5%, in credits, you might chalk this up as being a cost doing business, equivalent to if they negotiated a 5% or so discount.


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