In our ongoing litigation blog series, “Business Disputes: Mitigate, Mediate, and Safeguard,” Corporate and Securities litigation attorney Dharmi Mehta discusses the various types of business disputes that companies may face, from shareholder disagreements to external complaints. A common dispute that businesses encounter is breach of contract. In this post, Ms. Mehta focuses on key considerations for businesses when a client, vendor, or third-party has breached a contract.
Breach of Contract: A Business Threat
A business owner is faced with potential disruptions to business operations when another party has failed to meet their contractual obligations, thus, breaching their contract. Whether it’s the failure to deliver goods on time, incomplete services, or unfulfilled financial obligations, the consequences can be severe, ranging from financial loss to reputational damage.
While each case is different, understanding how to navigate these situations is essential to protecting your business. Before moving forward with a lawsuit, it is important to take preliminary steps to understand the nature of the breach and assess your business.
- Understanding the Nature of the Breach
While the first instinct may be to take legal action, it is advisable to pause and assess the situation first.
The first step is to evaluate the breach to determine:
- If a breach actually occurred
- What type of breach occurred
- Non-performance
- Delay in delivery
- Partial Performance
- Whether the Contract contains any clauses that may impact your ability to resolve the dispute such as:
- Dispute resolution provisions
- liquidated damages provisions
- Releases or restrictive covenants
For additional details on what constitutes a breach of contract, please refer to our previous post, What to do if you have been Sued for Breach of Contract, which covers how to evaluate a dispute and avoid unnecessary litigation.
- Evaluating Dispute Resolution Options
If your review confirms a breach, and the nature of the breach, the next step to take is to examine your options on how to resolve the dispute whether it may involve alternative dispute resolution options such as mediation or arbitration or proceeding with litigation.
- Communicating with the Other Party:
Facilitate an opportunity to discuss the breach with the other party and aim to come to an agreement that resolves the matter without litigation.
- Documenting the Breach
Maintain thorough records of the situation including the incident, all communications, and other relevant documentation as this information can be vital if the matter escalates.
How to Proceed with Legal Action for Breach of Contract
If negotiations fall through or an amicable agreement cannot be reached, pursuing a lawsuit may be necessary.
- Retain experienced Legal Counsel who can evaluate your case to determine whether litigation is indeed the right path to pursue.
- File a Complaint: If a lawsuit is determined as the best course of action, the next step is to file a complaint with the appropriate court. The complaint should include key information on the facts of the breach, grounds for your claim, and type of relief sought.
- Discovery: After a complaint is filed, both parties will exchange information relating to the matter. This includes document requests, and possible depositions.
- Settlement or Negotiation: It is important to note that negotiations and a settlement can still be reached if both parties can come to an agreement.
- Trial: If a settlement is not reached, the case may proceed to trial where a judge or jury will review the arguments and determine if a breach has occurred and the appropriate remedies.
As discussed in previous posts, the best way to handle contract breaches is to prevent them from occurring in the first place. By drafting clear, comprehensive contracts that outline the roles and responsibilities of all parties, as well as specifying dispute resolution processes, you can minimize the likelihood of a breach.
If a breach does happen, working with an experienced corporate attorney can help you navigate the litigation process effectively.
If a client, vendor or third-party has failed to meet their contractual obligations and breached a contract, please contact our corporate litigation counsel at 619.298.2880 or email info@jackolg.com for guidance on the best course of action.