Dear Dakota | My Vendor Went Out Of Business, But I’ve Already Paid For My Client’s Furnishings! HELP!

Nov 10

Dear Dakota,
My vendor just went out of business, and I’ve already paid them for my client’s furnishings. I cannot get ahold of anyone and am freaking out. What should I do?

01 | Contact your credit card company ASAP to dispute the charge and let them know you paid for these items but didn't receive them.

02 | Consider legal recourse. If you aren't able to dispute the charge with your credit card company, you could attempt to sue the vendor and its management if you believe there are grounds for fraud (meaning, the vendor/company knowingly committed fraud against you).

**Note, I’m not an attorney, check with an attorney licensed in your state to see what, if any, recourse you have.

03 | Always submit purchase orders to your vendors and only remit payment when you have received an order acknowledgment from the vendor confirming your order. These are typically legally binding documents. (And likely something you’ll need to show if you’re trying to say your vendor knowingly committed fraud like in tip two above and that they accepted and acknowledged your order even when knew they were not going to be able to fill it.)

04 | Always use your business credit card when making purchases, and make sure your chosen credit card company is good about handling disputes like these. Amex is historically very good about these issues.

05 | Negotiate your payment terms with your vendors. Make deposits rather than the full payment (if allowable) and only pay the balance once the item ships. I know sometimes it's easier to just pay in full so you don't have to "touch it" again, but for vendors with long lead times and where you may not have that personal contact (like a sales rep and a designated customer service rep), it could be worth that extra step.

Your vendor for interior design furnishings just went out of business, but you've already paid them for your client’s furnishings. What should you do? Contact your credit card company ASAP to dispute the charge and let them know you paid for these it

06 | Only purchase from reputable vendors with a longstanding history in the industry.

07 | Protect yourself with business insurance in case the client sues you in this type of situation.

If your client sues you since you were acting as their agent in purchasing the items on their behalf, there may be the possibility of coverage for the lawsuit if you have E&O (errors and omissions insurance), depending on what your coverage includes and excludes.

If you try to file a claim with your insurance for your loss on this transaction, it would essentially be for fraud (the vendor committed fraud against your company by taking payment for something they knew they weren't going to deliver). However, this is a fairly uncommon type of insurance claim to execute.

08 | And always minimize your exposure. As long as you are purchasing on behalf of your client, you assume the responsibility for the item. That is why — if a client wants you to purchase something from a vendor or pay for services from a contractor you're unfamiliar with — it's always best to decline and put that back on them.

Resources

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