There is a legal agreement between the buyer and the supplier. Both are required to follow the terms and conditions mentioned in the agreement. It is the responsibility of the buyer to pay the supplier on time while the supplier’s responsibility is to deliver the required item in the specific amount of time.

Due to late delivery of products, the buyer can face a lot of loss in the business. In order to partially compensate for a loss, the buyer can give a penalty to the supplier. Giving penalty is not a good gesture, however, sometimes the behavior of the other party becomes unbearable and you are left with no choice but to give a penalty.

You can write a penalty letter for giving the penalty. Before you write this letter, it should be ensured that you have added the penalty clause in the agreement signed between you and the supplier. This shows that the supplier knows about the consequences of delivering the items late and he will be mentally prepared for the penalty.

The main purpose of writing the letter is not only to compensate for the loss but also to encourage the supplier to be always on time when it comes to delivering the purchased items to the buyer.

The date beyond which the delivery will be considered late should be known by the supplier. Make sure that you have told that date to the supplier while placing the order.

The penalty letter should describe what the penalty for the late delivery is. It should also be stated in the letter that the buyer has a right to terminate the contract with the supplier if he is not ready to face the penalty. If there are any dues which are yet to be cleared by the buyer, the buyer can also hold them as a penalty.

Your letter should contain an appropriate introduction that should be able to explain the reason for writing the penalty letter. It should also remind the supplier that there is an agreed upon clause related to the penalty in the agreement.

Sample Letters

#1

I am writing this letter to advise that the deadline for delivery provided to you by our company has expired. The delivery was due last week. And it has not been received till yet. The delivery wasn’t supplied, and we did not even receive any updates regarding the delay in delivery or the new delivery date.

Can you please make sure to deliver our goods by the close of day today? Also note that due to this delay in delivery, our production has been stopped which means a huge loss in the profits. As per our trading agreement, we will be charging you a penalty as well.

#2

This letter is a reminder to you that the stock due in the last week has not been received yet. We submitted a requisition for the supply of the goods onsite two weeks ago. We did not receive the stock and neither did we receive any notification regarding the delay in delivery.

Considering the consequences and seriousness of this project, a delay in delivery is not very profitable for us and exposes us to reputational risk. In our recent meeting, it has been highlighted that due to the non-availability of the resources, the pace of our work has slowed down. We would, therefore, like to notify you that we need an urgent resolution to this problem along with the reminder that we will be penalizing you for this delay and the loss it has caused.