Terence Malick's surprise decision to pull out of Che, a $40m picture about the life of Cuban revolutionary Che Guevara that he had co-written, has dented the pride and perhaps the finances of sales house Wild Bunch - but the blow is unlikely to be fatal either to the French seller or to the wider independent film sector.

Late last week Malick informed his partners that instead of starting the project that was set to shoot in July, he had decided instead to proceed with The New World, a New Line-housed picture about Pocahontas, American natives and European explorers that he had also written. Malick reportedly said his reasons were that the indie-financed Che had not yet obtained its completion bond.

Wild Bunch chief, Vincent Maraval says he is now considering legal action against Che producers Laura Bickford, Stephen Soderberg and Benicio Del Toro - who was also to have starred as Guevara - for failure to deliver the film that they had contracted Wild Bunch to sell and for damage to his company's reputation.

Bill Pohlad's Rover Road Entertainment was chief financier, with VIP/Rising Star and Spain's Morena Films.

Alternatively, Maraval believes he may be advised to take out an injunction that would prevent Malick making any other picture until the matter has gone before an arbitration hearing.

'I spoke with Malick for an hour in Berlin and he said that if Wild Bunch could come up with the necessary pre-sales at the AFM he would be making this film with us.

'The film needed $32m of cash to get into production. We had to raise $15m at the AFM and did so. With France worth $4m and Germany for $3m still set to close, plus some smaller territories we were up to $23m. [German fund] VIP Medien was to have put up $9m. We put aside the 20 other films on our slate to make this effort at the AFM, which gave a result bigger than our annual turnover in a normal year. The issue of the bond is nonsense, we would have got that in due course. Instead we find all that was for nothing.'

Maraval fears that he could be sued for non-delivery by his distributor clients and worries that his company's reputation may have been damaged by the debacle. In which case he feels he should recover damages and interest from the producers.

'This was a unique project for the independent sector. Malick has made all his films with studios, but because of the subject matter the US studios would not have produced this one, even if they would have come in later as distributor. It had to be made the independent way,' said Maraval.

'If Malick had understood the extent of the problems he has caused, I don't think he would have done things the way he has.'

Maraval reports that Malick's lawyers claim the director can still make both films. But with Malick having completed only three films in the last 35 years it looks as though Wild Bunch would have to wait some time if he were to make another film before Che.

In that case Che would have to be completely restructured. 'If there is a big delay VIP will be forced to drop out after this year, our Japanese deal will collapse and our UK deal with Pathe will be lost too,' says Maraval.

Many of the stars, including the busy Colin Farrell, had not been retained on pay-or-play deals and had only agreed to keep their schedules open in order to have the rare chance of working with Malick.

Maraval says that the notorious case brought against Kim Basinger by the producers of Boxing Helena is precedent for the legal action he is considering. But his fears of being sued by distributors may be exaggerated.

'This stuff happens. We don't think of this as Wild Bunch's fault. It is not their production. People should not think badly of them,' said Berenice Fugard, acquisitions chief at Pathe Distribution in the UK. 'We were really disappointed, but you can't force people to do things. This was an exciting project with a great cast and a tough script, but Malick was what really interested us. He was an 'essential element' for us, without him we simply have no deal and there is no action to be taken.'

Other sales agents sympathised with the sales agent. 'Wild Bunch has a good track record, they will bounce back. Thinking otherwise is unnecessarily paranoid,' said one who asked not to be named. 'If the deals were done at the AFM, then it is unlikely even that the distributors will have made signature payments yet.'

Distributors known to have signed deal memos for the film include J-Net from Korea and Bim from Italy.