Contracts are the fuel that keeps businesses running smoothly. When one party fails to live up to its contractual obligations, it can be frustrating. Your first instinct may be to file a lawsuit as soon as possible. While litigation is always on the table, you should consider taking other measures before turning to the courts. Here are five steps every business owner should take if the other party is in breach of their contract.
1. Look over the contract
This may seem obvious, but it’s important. Your contract will contain the terms and conditions of your agreement. It should also identify the process for addressing any breaches of the contract. It’s possible that the other party may not have breached the contract at all. A thorough review should always be the first step when trying to resolve a dispute.
2. Calculate your damages
If there’s no harm, there’s no foul. You will need to show proof of damages if you wish to prevail on your claim. Determine how the breach caused your business to lose income. Lost wages or missed sales are some of the more common damages. If the breach did not have a clear impact on your business operations, you’re not going to find any sympathetic ears.
3. Reach out to the other party
If you feel like going scorched earth as soon as you learn of a breach, take a moment. Often, issues can be resolved by speaking with the other party. They may have been entirely unaware of the breach. At a minimum, speaking with the other party will give you a chance to consider their point of view. This can help preserve your business relationship going forward.
4. Consider mediation
Mediation is a middle ground between informally resolving your issues and pursuing relief through litigation. For mediation to be effective, you must both be willing to sit down at the table together and to allow a neutral third-party to frame your discussion. This option is often less expensive and less time consuming than taking your case to court.
This should always be your final step, especially if you’ve enjoyed a good business relationship with the other party up to this point. Pursuing litigation shows that you’re serious. However, there is usually no turning back if you find yourself at this point.
A breach of contract costs your business time and money. It’s important to acknowledge a breach and take steps to resolve the situation. A skilled legal professional can help you choose the best path forward.