4 steps prior to deciding whether going to Court is the right move for you and your small business.
All contracts come to an end (even the great ones).
Some end on their terms, some are lawfully terminated, and others are breached. When a contract is breached it is often unexpected, frustrating, and threatening to a business that may not have seen it coming.
While a textbook or two could be written on what happens next, this article hones in on the top 4 actions you should take in the immediate aftermath of a breach to minimize the disruption to your business.
While many people’s instinct is to run to Court in this situation, that is rarely the right answer. Litigation is costly, risky, time-consuming, and rarely addresses your business needs during the time you are waiting for a decision from the Court.
For these reasons, I strongly recommend working through these 4 steps and only then making an educated decision about whether going to Court is the right move for you and your business.
1) Find out what happened.
- The first step should always be to find out what happened. Why did the other party to your contract decide it couldn’t continue performing?
- Were the terms not right for it anymore?
- Did something better come along?
- Did something else happen in the business or in someone’s personal life that makes it hard for it to continue performing?
There are countless reasons why a contract is breached and your response should take into account what those reasons are.
If you have a direct line of communication with the breaching party, the best way to get this information is often to ask, but if that is not working you may have to get creative and collect the necessary information by other means. This information will be helpful in a negotiation as well as a litigation, if you end up there.
2) Explore alternatives with the breaching party.
Once you have determined as much as you can about the reason for the breach, it’s time to explore your options.
This process should be as creative as possible and the goal is to identify as many possible solutions that address the breaching party’s concerns while conserving your own interests. Solutions can be all over the map.
If continuation of the relationship is an important factor, you may want to consider altering the terms of the agreement (temporarily or permanently) in order to preserve the relationship.
If the continuation of the relationship is no longer of interest then you might want to find a way to ensure an orderly wind-down of the relationship or assistance in transitioning the contract to another party with the breaching party’s assistance.
If you are having trouble communicating with the breaching party or generating creative options for resolution, consider reaching out to professional who might be able to help, such as a mediator.
A great mediator can facilitate a discussion between you and the breaching party that you might not be able to engage in directly, they can help you identify your interests in the negotiation, and help generate alternative solutions that you might not have otherwise thought about.
Next: Steps 3 and 4