Supply shortages exist everywhere. Speaking about shortages that have shut down factory production, President Biden called semiconductors “a 21st century horseshoe nail.” (Retrieved fromhttps://www.industrynet.com/blog/impact-of-supply-shortages-on-us-manufacturers.) The reference is to the nursery rhyme dating circa 1390:
For want of a nail the shoe was lost.
For want of a shoe the horse was lost.
For want of a horse the rider was lost.
For want of a rider the battle was lost.
For want of a battle the kingdom was lost.
And all for the want of a nail.
(Retrieved from https://www.Pneufast.com/our-story) UAW Local 444 President said about the Jeep Belvidere plant closure over the chip-shortage that: “This just-in-time delivery is costing us untold dollars for short-term savings.” (Chi Trib. “Jeep’s Belvidere site shut because of chip shortage,” §2, p.1, 03-30-21.)
In prior In the Loop articles, we wrote that the U.S. has about 5% of the World’s population, but produces almost 20% of the World’s goods. According to the International Monetary Fund, these are the highest-ranking countries in the world in nominal GDP for 2020:
Supply shortages create big legal liability. Under the Uniform Commercial Code, when a supplier fails to deliver product, the customer can “cover” by getting the same or similar merchandize somewhere else. (U.C.C. Section 2-712.) All well and good in markets without shortages. But if the customer has no readily available product, or the alternative source is far more expensive than the supplier’s products, the law says the customer can still “cover” and get other losses as well (known as “incidental” and “consequential” damages).
Although there are possible legal defenses (“mistake,” “impossibility,” “impracticability” and “commercial frustration” come to mind), the best defense for the supplier is a well-written agreement. Having prepared hundreds of Supply, Buy-Sell and Purchase Agreements, we know the value of not losing business “all for the want of a nail.” Call us –
