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4 key questions about breached contracts and litigation

On behalf of Cohn Lifland Pearlman Herrmann & Knopf LLP | Jan 29, 2019 |

As a small business owner, you know that everything needs to click for your business to succeed. Employees have to pull their weight. Orders have to ship out on time. Debt needs to be managed properly. Jobs have to be completed on schedule.

Unfortunately, you do not have full control over every aspect of every job. For instance, maybe you put in an order with a parts and materials supplier. You have your own orders waiting to get filled, but you need those parts to come in before you can begin assembly and shipping.

When the supplier misses deadlines or otherwise fails to deliver on your contract, it sets you back. It hurts your reputation. It makes you lose sales. You need to know what to do. Here are a few questions that can help you get started.

Is it a breach of the contract just to miss the deadline?

Yes, it absolutely can be. The supplier may argue that it’s not a breach since it did eventually fulfill its end of the deal, but that’s not always true. It depends on the specific terms of the contract. If those terms said that shipments had to get dropped off at a specific time or on a specific day, that’s just as important as fulfilling the order at all. Missing the deadline can be enough to show that it broke the deal; that it breached the contract.

Does the contract need to be written?

It is wise to use a written contract because it’s easier to prove what the terms the contract are, but the mere fact the contract is not in writing does not mean there is no contract. In some cases, oral contracts also hold up. They are still binding.

Will you go to trial?

There is a possibility you will, but many disputes are resolved outside of the courtroom through settlement between the parties, mediation, or arbitration. It depends on many things including the type of damages you want to recover and what steps you and the supplier take to work with each other. If the supplier denies any wrongdoing and insists that it followed the contract, you may need to use litigation to set things straight and recoup your losses. Remember, if your business’ reputation took a hit because of the supplier’s mistake, that is a long-term issue you need to consider.

What are compensatory damages?

Essentially, the goal of seeking compensatory damages is to make it as if the contract never was breached. You lost direct sales. You lost customers. And, as noted above, your reputation suffered. You have to consider all of the ways the supplier’s failure to adhere to the contract impacted your company.

If you are involved in a breach of contract dispute, make sure you know what legal steps to take. You may wish to work with an attorney experienced in these matters.