"Critical Vendor": The Courts Don't Think It Means What You Think It Means

Picture the following scenario: You are a small business owner and a supplier of goods to a customer who has failed to pay for the goods that you provided to them. You call to inquire about the missed payments. The customer is very apologetic and seeks to maintain this critical business relationship, so the customer sends a check as partial payment, which is promptly cashed. A month later, that customer files for bankruptcy. The customer seeks to continue doing business with its vendors, as that is critical for them to survive. The bankruptcy court enters an order allowing the customer to pay its critical vendors. You receive payment on the rest of the money owed. A year later, you receive a letter from a law firm that represents the estate of the bankrupt customer, which demands that you return the partial payment received before the bankruptcy, or they will file a lawsuit against you. What is going on, you ask yourself? I thought I was critical?

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