30-second answer
A common error after payment default is continuing to ship while waiting for the distributor’s cash flow to improve, increasing exposure. Sudden suspension can also damage end-customer projects. Escalation should reflect contract rights, credit and asset position.
Applied situation (illustrative)
Consider a Canadian distribution scenario: Several invoices are overdue and the supplier threatens to stop new shipments. Reconcile deliveries, credits, disputed defects and payment routing before treating the entire account as one unpaid balance.
Classify the problem before calling everything “breach”
What the brand should focus on
Brands should set credit limits, aging tiers, supply-suspension triggers and restart conditions, and regularly confirm the actual debtor entity.
What the distributor/agent should focus on
A distributor relying on quality, rebate or return set-off issues should document them early rather than withholding payment without a clear written basis.
Clauses and records to check
- Invoice maturity
- Acceptance evidence
- Credit note
- Set-off
- Shipment suspension
Reconcile invoices with deliveries, credits and defect notices before demanding the entire ledger balance. In Canada, start with the province and actual sales model. National distribution language alone does not resolve questions tied to local performance or franchise features.
Additional point for Canada
Identify the province, industry and real place of performance. A nationwide arrangement may still raise province-specific contract, franchise or consumer questions.
Financial exposure and response options
Work invoice by invoice: maturity, delivery, credits, payment and any documented quality set-off.
Settlement terms worth writing down
For this Canadian arrangement, write down how invoice maturity, credit note and shipment suspension will be handled. Set dates and responsibilities for payment or handover, and state what happens if an agreed step is missed.