Negotiating a business contract is a way to make company operations more predictable. Having employees under contract and vendors bound by agreements to deliver supplies on a specific schedule can help a company more effectively schedule its operations and control its costs.
Sadly, simply negotiating and signing a contract with an individual or another business is never a guarantee will follow through with their promises. Frequently, those bound by a contract will think very little of violating the terms of the agreement that they signed. Businesses facing a significant breach of contract may be able to remedy the situation through one of the approaches detailed below.
Making formal contact and highlighting certain clauses
It’s common for businesses to include special clauses in contracts that help them address breaches in the future. For example, there may be a financial penalty assessed in scenarios involving delayed product delivery or delayed payment from customers or clients. In scenarios involving restrictive covenants imposed in employee contracts, violations could lead to financial penalties specifically outlined in the contract.
Other times, a contract may include alternative dispute resolution clauses. A business seeking to enforce a contract may send notice to the other party of the breach, alert them of the penalties they may face and may suggest scheduling a mediation session or sit-down negotiation. Sending written notice to the other party, reminding them of contractual terms and warning them of the issue and the penalties it could generate may be enough to correct the issue.
Initiating civil litigation
When the other party to a contract either does not respond to notice of a breach of contract or insists that they are in the right, it may then be necessary to take the matter to civil court. Occasionally, getting served for a lawsuit can be enough to motivate a business executive or former employee to sit down with the other party and try to discuss the disagreement. Quite a few breach-of-contract scenarios end up settling after one party tries to take the matter to court. Other times, it might be necessary to have a judge review the contract and the circumstances and then interpret the law and the agreement for enforcement purposes.
One of the biggest mistakes a business facing a significant contract breach could make would involve not taking any action at all. Seeking legal guidance and responding in a timely and assertive matter to a material breach of contract is important for a company that wants to protect itself from the misconduct or failings of others.