Here's a question I get a lot from clients, especially when they first start working with Launch: what do we do when the other party doesn’t live up to the terms of the contract we signed?
This seems to be a common issue among business owners, whether they are a sole proprietorship, LLC or a corporation, and it always boils down to the same thing: they contracted with another company or person for a product or service and it isn’t being delivered as they expected.
What’s happened is there has been a “breach” of the contract. A breach is basically a broken promise; the other party promised to deliver something in a certain way and they aren’t or haven’t done so. Now what? Here’s a rundown of the most common ways to handle this situation. While breach of contract situation can get complicated and involved, it doesn’t account for all situations involving a breach of contract, but it is what I most commonly see and think can be helpful in a majority of breach situations involving small businesses.
The point is to avoid court and litigation, it’s expensive and time consuming. So, first, think about what the breach is and determine if it’s a minor breach or a material breach.
Once you’ve determined how bad the breach is, take a look at your contract. A good contract will address breach and explain the process for dealing with one. If yours does, make sure to follow the proper steps, usually it involves sending the other party notice and requesting that the problem be remedied. Exercise the rights you have in the contract. One of the biggest issues I see that leads to problems is contract rights not being used. The agreement will lay them out, don’t be afraid - this usually will help clear things up avoid litigation and get delivery of what you want.
Often things can be cleared up simply by communicating with the other party. If not, always try to negotiate first to get an issue resolved. If that doesn’t work have your small business lawyer send a letter demanding performance to avoid a lawsuit. Finally, if that doesn’t work, file a lawsuit in order to protect your rights.
It goes without saying that you need good contracts set up for your business that protect your rights and give you options in the event something does go wrong.
This is one of the most common areas where small businesses face issues, and it can potentially occur in any aspect of a business. Knowing your rights, remedies and options can help this be less painful and handled faster. Of course, this doesn’t always work, in which case you should be prepared to enforce your contract rights in court.
Most of the time nobody is looking for a court case. If you own or run a small business it’s important that you have contracts reviewed regularly and someone who can help you in the event you encounter a breach situation.
Contract management and enforcement can be tricky. If you need help or want a free consultation, contact us to see how we can be of assistance.