The Cost of Sending Money to the Wrong Place
Progressive Laboratories, Inc. v. Living Fuel, Inc., 2026 WL 1910245 (5th Cir. 2026)
This case arose from a business relationship between a nutritional supplement manufacturer and one of its customers. Progressive Laboratories manufactured specialty supplements for Living Fuel under a series of purchase orders. Their arrangement was straightforward: Living Fuel would place an order, pay a 50% deposit, and make final payment once the products were ready to ship. Problems arose when an imposter hacked into a Progressive employee’s email account and sent Living Fuel fraudulent wiring instructions. Believing the instructions were legitimate, Living Fuel sent more than $130,000 to the imposter instead of paying Progressive. Progressive then refused to complete another product order until it received payment and sued for breach of contract.
After a bench trial, the district court found that Living Fuel breached the contract by failing to pay for the products it had received. The Fifth Circuit affirmed. The court concluded that Living Fuel was in the best position to prevent the fraud because the fraudulent email contained several warning signs, including typographical errors, unusual language, and wiring instructions that differed from prior payment practices. The court also rejected Living Fuel’s counterclaims and agreed that the parties’ separate purchase orders did not create an installment contract. Each purchase order specified a definite quantity of products and did not contemplate future transactions, making each order a separate agreement.
For businesses that regularly send and receive electronic payment instructions, this case underscores the importance of strong payment verification procedures. Courts may place the loss from payment fraud on the party best positioned to detect suspicious instructions and prevent the fraud.
The decision also serves as a reminder that a history of doing business together does not automatically convert separate transactions into a single continuing contract. If parties intend for multiple orders to be treated as a single, ongoing arrangement, they should say so clearly in their agreements rather than relying on past dealings or expectations of future business.
This post is for informational purposes only and does not constitute legal advice. If you have questions about your specific situation, you should contact a lawyer for assistance. Nothing herein is intended to create any attorney-client relationship between you and DLM LAW.
