Company Law - Small Business Issue
Discussion
I having detailed an issue I am having below, see if someone has any ideas, really appreciate any direction with it:
I run a small business that manufactures ladies clothing out of India. We are registered in UK and most of our clients are from the UK.
We have a client which placed an order for a few hundred dresses, a swatch of the fabric to be used for the garments was sent to the client (which was approved), prior to the fabric being dyed to the client’s required colour. On the invoice we asked for a 40% deposit, as we do with all our clients. This is to cover our raw material costs and alleviate the issue of clients cancelling orders when production has commenced and raw materials have been bought. The client paid the deposit required, and the purchase of fabric commenced. A couple of weeks later, we sent a swatch of the fabric after the colour had been added to the fabric, the complete job lot of fabric to be used for all the garments had been dyed at this stage. The client claimed the fabric was not the same, even though the very same fabric chosen was just dyed to the client’s required colour. I found out that the client had changed their mind and found another supplier, this is the reason that they did not want to continue the production. We found this out from another source; the client was very arrogant and did not want to divulge this information. We are now left with metres and metres of fabric which was specifically dyed for the client, and cannot be used again. The client wants a full refund of their deposit.
My question is; am I obliged to give them a full refund, even though we have bought and dyed the fabric? What am I obliged to refund, if anything. I have had many expenses on top of this such as courier costs, my time and effort, overseas calls, etc. I would have thought the whole point of a deposit is that it is non-refundable, to protect businesses like me from orders being cancelled midway through the manufacturing process?
I appreciate anyone's thoughts on this matter.
Thanks
I run a small business that manufactures ladies clothing out of India. We are registered in UK and most of our clients are from the UK.
We have a client which placed an order for a few hundred dresses, a swatch of the fabric to be used for the garments was sent to the client (which was approved), prior to the fabric being dyed to the client’s required colour. On the invoice we asked for a 40% deposit, as we do with all our clients. This is to cover our raw material costs and alleviate the issue of clients cancelling orders when production has commenced and raw materials have been bought. The client paid the deposit required, and the purchase of fabric commenced. A couple of weeks later, we sent a swatch of the fabric after the colour had been added to the fabric, the complete job lot of fabric to be used for all the garments had been dyed at this stage. The client claimed the fabric was not the same, even though the very same fabric chosen was just dyed to the client’s required colour. I found out that the client had changed their mind and found another supplier, this is the reason that they did not want to continue the production. We found this out from another source; the client was very arrogant and did not want to divulge this information. We are now left with metres and metres of fabric which was specifically dyed for the client, and cannot be used again. The client wants a full refund of their deposit.
My question is; am I obliged to give them a full refund, even though we have bought and dyed the fabric? What am I obliged to refund, if anything. I have had many expenses on top of this such as courier costs, my time and effort, overseas calls, etc. I would have thought the whole point of a deposit is that it is non-refundable, to protect businesses like me from orders being cancelled midway through the manufacturing process?
I appreciate anyone's thoughts on this matter.
Thanks
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