Say your supplier promised delivery on 15 March and it's now 25 March. Nothing has turned up, your own customers are chasing you and a production line is standing idle. What you can do about it depends mostly on what the supply agreement says, and partly on the background law that fills the gaps when it says nothing.
What the law says if the contract is silent
Where a contract for the sale of goods fixes no delivery date and the seller has to send the goods, the Sale of Goods Act 1979 requires delivery within a reasonable time. What counts as reasonable depends on the circumstances, which is a poor basis for planning a production schedule. A fixed date, or a clear way of setting one (such as dates confirmed in each purchase order), removes most of that argument.
Late delivery is a breach of contract, so you can claim damages for the loss it causes. Whether you can also refuse the goods and bring the contract to an end is a separate and harder question.
When late delivery lets you terminate
You can usually only terminate for late delivery in two situations. The first is where time is of the essence, meaning the delivery date is a condition of the contract and missing it entitles you to treat the contract as at an end, however short the delay. The second is where the delay is so serious that it amounts to a repudiatory breach, broadly one that deprives you of substantially the whole benefit you were meant to get from the contract. Outside those two situations your remedy is damages, and you have to take the goods when they come.
Time can be of the essence because the contract says so expressly, or because the nature of the contract makes it so. In commercial sales of goods a fixed delivery date is often treated that way, but it turns on the wording and the context. It can also become of the essence after the supplier has already missed the date, if you serve a notice making time of the essence and giving a reasonable further period to deliver. That route is useful where the contract is silent, but the notice has to be clear and the period genuinely reasonable.
If the delivery date really matters to you, don't rely on a court reaching that conclusion later. Ask for a clause saying time of delivery is of the essence, or one giving you an express right to terminate if delivery is more than a stated number of days late. Expect the supplier to resist a blanket clause and offer a grace period instead, which may be a fair compromise.
Be careful before terminating. A buyer who terminates without the right to do so is itself in repudiatory breach, and can end up paying the supplier's losses. If you're in a live dispute, get advice on the specific contract before you send the letter.
Liquidated damages for delay
Many supply agreements set a fixed sum payable for each day or week of delay, usually with an overall cap. For example, the supplier pays £500 for each day delivery is late, up to 10% of the contract price. That is a liquidated damages clause. Its value to you is that you don't have to prove what the delay actually cost; once the delay is shown, the agreed sum is payable.
The limit is the rule against penalties. A sum payable on breach won't be enforced if it imposes a detriment on the supplier out of all proportion to any legitimate interest you have in the contract being performed. The older idea that the figure must be a genuine pre-estimate of your loss is still a sensible starting point, but the modern test is wider than that. A rate that reflects a reasonable view of what delay is likely to cost, agreed between businesses of similar bargaining power, is usually safe. A rate chosen to frighten the supplier into performing, with no real connection to any loss or legitimate interest, is at risk.
The drafting around the rate matters as much as the rate. Check whether liquidated damages are stated to be your sole remedy for delay, because if they are you may be stuck with the capped sum even if your real loss is far higher. Check that the clause doesn't cut down your right to terminate for prolonged delay. And check whether the supplier gets extra time for delays you cause. If you contributed to the delay and the contract has no mechanism for extending the date, the supplier may argue that liquidated damages no longer apply at all.
Claiming damages without a liquidated damages clause
If there is no liquidated damages clause you can still claim, but you have to prove the loss. That means showing the delivery was late, that the delay caused the loss, and that the loss was of a kind the parties would reasonably have contemplated when they made the contract. Losses that are too remote can't be recovered.
You also have to mitigate. If your line stopped, a court will ask whether you tried to source replacement goods elsewhere. The extra cost of buying substitutes is usually recoverable, but losses you could reasonably have avoided are not. Look at the limitation of liability clause too, because an exclusion of loss of profit or a low cap can wipe out most of a delay claim whatever the evidence shows.
Grace periods and cure periods
Supplier-friendly terms often give the supplier extra time before you can do anything. A clause might say delivery dates are estimates only, or that you can't terminate unless delivery is more than 30 days late and the supplier has then failed to deliver within a further period after written notice. Put those together and you could be without the goods for well over a month with no remedy at all.
Watch in particular for wording such as “delivery dates are approximate” or “time of delivery shall not be of the essence”. It is common in suppliers' standard terms and it takes away the termination right described above. If you can't get it removed, aim for a short grace period, liquidated damages running from the original date rather than from the end of the grace period, and an express right to terminate if the goods still haven't arrived by a longstop date.
Accepting or rejecting goods that arrive late
Where time is of the essence, or the delay has become repudiatory, you can refuse to accept the goods. You need to act quickly and clearly. Under the Sale of Goods Act 1979 you are treated as having accepted goods if you tell the supplier you accept them, if you do something inconsistent with the supplier still owning them after you've had a reasonable chance to examine them, or if you keep them beyond a reasonable time without telling the supplier you reject them.
In practice, if late goods are no longer any use to you, say so in writing straight away, don't use or resell them, and make them available for collection. If you decide to take them after all, you normally keep your claim for damages for the delay, but you may lose the right to terminate because of it, so reserve your rights in writing when you accept.
Force majeure and excuses for late delivery
English law has no general doctrine of force majeure. A supplier is only excused for events outside its control if the contract says so, or in the rare cases where the contract is frustrated. So the wording of the force majeure clause matters a great deal.
A clause covering natural disasters, war and government action that prevents performance is normal. Be warier of clauses that include shortages of materials, failures by the supplier's own subcontractors or industrial action at the supplier's own business, because those are risks a supplier can usually plan for. A fair clause also requires the supplier to tell you promptly and take reasonable steps to limit the effect, and lets you terminate if the event goes on for longer than a set period.
Repeated late deliveries
In a framework or call-off agreement, consider a clause letting you terminate if a set number of deliveries are late within a rolling period, even if no single delay would justify termination on its own. That is much easier to agree at the outset than to argue later that persistent lateness has become a repudiatory breach.
What to check before you sign
Look for a firm delivery date or a clear way of fixing one; either time of the essence or at least a longstop date with a right to terminate; a liquidated damages rate that is proportionate and isn't your only remedy; and a force majeure clause limited to events genuinely beyond the supplier's control. If you want a second pair of eyes on the delivery and remedy provisions, you can upload your supply agreement to QuickLegalCheck for a review.
Related: what the supply agreement review covers, and a complete sample report.