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3 steps for handling a vendor or service provider contract breach

On Behalf of | Mar 9, 2024 | Business law

Contractual agreements are the lifeblood of most businesses. A contract with a vendor ensures that a production facility has the raw materials it needs to efficiently produce the goods it distributes to consumers or other businesses. A contract with a service provider could help a business by outsourcing payroll matters and other business needs to competent professionals.

Contracts can even establish a timeline for payment when a business delivers materials to a customer or takes on a large project for a client. Unfortunately, not every party enters into a contract with the intent of following through on it. There are also cases involving mistakes or omissions that can cause issues for one party because the other does not fulfill contractual promises.

What steps can help resolve a significant business contract breach?

A review of the original agreement

It is easy to complete the details of one contract with the term set in another or to misremember certain elements of an arrangement. From confusion about timing to matters related to pricing, there are many details that someone may need to validate by reviewing a contract when they believe there has been a breach. Validating exactly what the contract requires makes it easier to address the matter effectively.

Communication with the other party

Once someone has affirmed a breach of contract occurred by reviewing the contract, communication about the matter is critical. Sometimes, informal communication with the other party could lead to a resolution. The party that failed to fully uphold the agreement could potentially resolve the matter once they realize their mistake. Written communication can eliminate claims that the other party was unaware of the matter even if they do not act to resolve it quickly.

File a lawsuit

If a breach has occurred and the other party does not readily move to address the matter, pursuing a lawsuit might be a wise step. The vast majority of lawsuits related to contract breaches settle outside of court. When a business takes the time to file a lawsuit, it communicates its sincerity about resolving the matter to the other party. They also pave the way for a legal solution to the contract breach of the other party is not amenable to resolving the matter amicably. The courts potentially have the authority to invalidate the agreement, compel a refund, compensate a business for damages or order specific performance from the party and breach of the written agreement.

A contract breach can be both inconvenient and expensive. Taking timely action can minimize the negative impacts that a contract dispute has on an organization.