Second Circuit Warns Businesses: Stick to Written Payment Terms or Risk Costly Contract Disputes

A new court decision highlights why businesses must follow clear, written payment terms when buying or selling goods. On July 24, 2025, the U.S. Court of Appeals for the Second Circuit issued a ruling in Vista Food Exchange, Inc. v. Comercial de Alimentos Sanchez (No. 22-2660) that should prompt every business to review how it handles customer payments and sales contracts.

What Happened in the Case?

Vista Food Exchange sued Comercial de Alimentos Sanchez for breach of contract over $750,000 in unpaid meat orders. Sanchez didn’t deny that it skipped the wire transfers—but argued it had already paid in full by handing cash to Vista’s salesperson in Tijuana, Mexico. Vista claimed it never saw the money. Law Junkies can read the case here.

The lower court sided with Sanchez, finding that the customer had satisfied its obligations by paying the salesperson—even if that wasn’t what Vista’s invoices said. The Second Circuit partly reversed the decision and ruled that a jury must decide whether the salesperson had authority to receive payment and whether the theft was foreseeable.

Why This Case Matters to Your Business

This ruling highlights several legal and operational risks businesses face when they allow informal or undocumented payment practices:

Salespeople Usually Can’t Change Payment Terms

Just because a salesperson says, “You can pay me directly,” doesn’t mean your company is legally bound. Vista showed that only its corporate office had authority to change payment methods or accept funds. If your customers rely on your employees’ statements, you could be on the hook unless you’ve clearly limited their authority. Try to have clear terms and conditions in your purchase orders, sales orders, or sales acknowledgment documents.

Oral Modifications May Be Invalid

Under the Uniform Commercial Code (UCC), (which most every state has as its law) any contract for the sale of goods worth $500 or more must be in writing. That includes modifications to payment methods or terms. Courts generally won’t enforce oral changes to payment arrangements unless there is written agreement. There are exceptions to this depending on the facts.

Informal Payment Histories Can Backfire

The customer in this case argued that it had successfully made cash payments to the salesperson in the past—and that Vista “acquiesced.” Vista disputed those claims and said the invoices were altered. The court ruled that the parties must resolve disputes about prior dealings and course of performance at trial. The Uniform Commercial Code defines “course of dealing” and “course of performance” to promote uniformity in commercial transactions.

Unsecured Payments Create Legal Exposure

Even if the parties made cash payments, the court emphasized that determining whether the paying party could have foreseen the loss requires a fact-intensive analysis.
If your business allows unsecured payments or inconsistent billing practices, you may bear the risk of employee theft or fraud.

Tip for Businesses: Avoid These Mistakes in Commercial Transactions

Businesses engaging in domestic or international trade should implement safeguards to reduce litigation risk in breach-of-contract cases. Here are a few best practices:

Have terms and conditions on your purchase orders, sales orders and sales acknowledgments. Avoid the “Battle of the Forms,” a war that is interesting for law junkies but costly for businesses.

Follow the invoice: Always pay to the name and address listed on the invoice, using the specified payment method (e.g., wire transfer).

Train staff: Make sure salespeople and customers understand who has authority to accept payments or modify contract terms.

Put it in writing: Don’t rely on oral agreements. If payment terms change, document them clearly and promptly.

Use traceable payments: Wire transfers and checks create a record. Cash does not—and it invites problems.

Law Junkie Legal Bite

Courts closely examine what the parties agreed to in writing when enforcing payment obligations in business contracts. Letting salespeople collect cash or ignoring the terms of your own invoices can expose your business to legal claims, lost revenue, and costly litigation. The Vista Food case is a reminder that businesses must formalize and document their payment practices—or risk losing more than just money.