A Customer Cancelled After Production Began. How a Missouri Manufacturer Recovered Payment
The story follows the purchase order, cancellation terms, and costs behind a negotiated commercial resolution.
The questionWho pays when a customer cancels a custom order after production has started?
Illustrative example
SPRINGFIELD, Mo. — A Springfield metal fabricator has recovered $318,000 from a customer that cancelled a large order of custom brackets after production was underway.
The customer said it was entitled to cancel at any time. The fabricator had already bought steel and run half the order.
The parts were made to the customer's specifications and could not be sold to anyone else.
Orlesse Law pointed to the purchase order's terms, which allowed cancellation only with payment for work in progress, and documented the material and labor costs already spent.
The customer paid $318,000 and took delivery of the finished parts.
The fabricator did not recover the profit it expected on the unfinished half of the order.
Cancellation clauses in purchase orders often decide who bears the cost of custom work already started.
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