There is supposed to be trust and a growing relationship between two companies when they enter into a mutually beneficial contract.

However, that may not have been the case between Starbucks and a small snack company that quickly grew after landing a contract with the coffee giant.

According to a lawsuit filed by Mellace Family Brands, Starbucks breached the contract they signed, which set up an agreement for Starbucks to purchase and sell MFB-branded snack products (organic nuts and various candies) at their stores. Starbucks ended the agreement shortly after they claimed Mellace had “ongoing quality issues.”

MFB says that the small company had to revise its organizational structure when they got the Starbucks contract — improving the business and ordering vast amounts of supplies and deliveries to support the contract — that has cost it about $20 million now that Starbucks pulled out of the contract.

It is yet to be known if the “quality issues” Starbucks referenced are true or not (MFB says some of their products may have been contaminated by a Starbucks facility, while Starbucks faults MFB for poor food), but if Mellace’s claims are true, breaching the contract could make Starbucks liable for some of the financial troubles experienced by MFB.

The organization left holding a contract when the former partner wrongfully bailed on the agreement can suffer permanent damage to its reputation, let alone massive financial losses. These consequences of an unjust act can cripple a business. The victimized company in a breach of contract case should attain experienced legal representation so that their case is fully laid out in court, and that their plight can hopefully be fairly compensated.

Source: ABC News, “Snack Company Says It Lost $20 Million After Starbucks Allegedly Broke Contract,” Susanna Kim, Sept. 12, 2012

  • When a company breaches a contract, they should be held accountable for this act. To learn more, please visit our Connecticut contract dispute page.