Business owners often encounter situations where one of their vendors breaches a contract.
Needless to say, it is important for all business owners to know what to do if this happens.
In general terms, a breach of contract occurs when one party does not comply with their contracted obligations.
As there are innumerable types of contracts, and contract terms, a contract breach can take on many forms.
Vendors may provide services or goods to a company, but fail to follow the guidelines in the contract.
They may also provide services late.
Sometimes breaches of contract may occur because a vendor was negligent.
Unforeseen circumstances, such as financial difficulties, can also prevent a vendor from fulfilling a contract.
There are three common measures business owners can take after a vendor breaks the contract.
1) They can cancel the contract and seek restitution.
2) Business owners may also seek damages. If they ask for compensatory damages, the vendor has to pay the amount that the company lost because of the contract breach. If business owners did not lose money because of the breach, then a court might order a vendor to pay nominal damages.
3) Sometimes neither of these options will work if the vendor was contracted to provide a unique service or product. In this situation, business owners may ask a court to order “specific performance.” This means that the court can order the vendor to carry out the terms of the contract. Business owners can seek this option when the amount of damages is not clear, the product contracted for is “unique,” and/or when they cannot replace the service.
Steps to take
As soon as a contract breach occurs, people should review the contract, and determine their options.
According to Chron.com, the business contract may include several methods for resolving a conflict.
If the contract specifies that business owners and vendors have to attend mediation, people need to take this step before they seek other remedies.
Additionally, people should speak to the vendor. Communication may help everyone understand why the breach of contract occurred. If business owners and vendors have a good working relationship, they may be able to resolve the situation peacefully.
If you are a business owner who is dealing with a vendor, or other party, who has breached a contract that you have entered into with them, call Bashian P.C.