People sometimes say that contracts are the lifeblood of business. This aphorism stems from the importance of having predictable costs and reliable operational support. Contracts are crucial to the smooth and profitable operation of a business. Business contracts clarify the obligations that organizations have to one another or the expectations one company has for a service provider. In theory, those who negotiate contracts should uphold those agreements in all but the most extreme of circumstances.
Unfortunately, some people sign contracts with little intention of following through on the agreement. Other times, extenuating circumstances prevent fulfillment of contractual obligations. A breach of contract scenario can be disruptive and potentially expensive for a business.
How can executives or owners resolve a contract dispute?
Direct communication
Sometimes, a breach of contract is accidental. There was an oversight or miscommunication, but the issue was not intentional. Perhaps the salesperson managing a business’s account with a vendor is on medical leave, and the person covering for them made an oversight. Maybe there have been supply chain issues, and a vendor failed to communicate that with its clients. Sending a written notice advising the other party of the contract violation and then discussing the matter with them could potentially help resolve the issue.
Alternative dispute resolution
Contract disputes can cause disruption to a previously positive working relationship. Especially in scenarios where the parties to the contract might prefer to continue doing business with each other, finding an amicable solution to the situation might be the best outcome possible. Alternative dispute resolution such as mediation or arbitration can sometimes lead to a reasonable solution to a contract dispute.
Contract litigation
Breach of contract lawsuits can help companies enforce their contracts. Such lawsuits can lead to orders of specific performance that resolve contract violations. They can also lead to a judge awarding the plaintiff damages for the economic impact the breach may have had on company operations.
When amicable solutions don’t work, businesses may need to take a matter to civil court. Being willing to take necessary steps after a breach of contract is as important as drafting a thorough agreement initially. Those who assertively address contract breaches can potentially prevent others from negatively impacting an organization or hold them accountable for doing so.
