Most business owners and executives are eager to lock in agreements with companies that provide their raw materials or retail goods. Yet, despite making an agreement more enforceable, a vendor contract is not an absolutely guarantee that another business will follow through on its promises to deliver goods or materials to a business.
Unfortunately, vendor fraud and contract breaches are still common issues that can cause significant financial losses for affected businesses. Oftentimes, when people think of vendor contract breaches specifically, they visualize the non-delivery of goods or materials. However, vendors are in a position to commit multiple types of contract violations, one of which could cause particular harm to a business receiving their merchandise or raw materials and the customers of that business.
Substitution fraud is a persistent business challenge
Perhaps a successful restaurant puts in a large order for several crucial restaurant supplies. When ordering kitchen basics like honey, maple syrup or olive oil, someone might expect to receive exactly what they request. However, those three food products in particular are a source of many substitution and adulteration fraud claims in the United States.
A business might try to pass off soybean oil as extra virgin olive oil or provide synthetic syrup instead of real maple syrup, for example. In the worst-case scenario, such substitutions or adulterants might trigger an allergy in a customer and therefore a lawsuit against the restaurant.
Bars and restaurants are also frequent targets of alcohol substitution or adulteration fraud, as there’s a sharp markup for prestige brands of alcohol. Many consumers would not necessarily know if their cocktail contained a top-shelf vodka or an incredibly cheap vodka, and those accepting orders at businesses often don’t have the ability to inspect the materials for adulteration, repackaging or substitution.
Material substitutions could also be an issue for manufacturers, as they may receive brittle metals or poorly-made components that could put their products at risk of failing. Those that uncover such fraud may need to take legal action against the vendor that has breached a contract by engaging in these devious practices.
Recognizing and monitoring carefully for the various types of contract violations that can harm a business won’t necessarily prevent malfeasance from outside parties but may help to deter it and may help to minimize the harm that such misconduct ultimately causes if and when it occurs.