Running a successful business is a challenging undertaking. Executives and entrepreneurs need to make operations predictable. They typically need to control costs to produce a reliable profit. They also need to have clear arrangements with service providers and vendors. Even contracts with employees can prevent unfair competition and behavior that could damage the company’s reputation.
Unfortunately, even the most precise and thorough contracts cannot prevent another party from violating business arrangements. The contractual violations of one person or another business could cause clear economic damage to an organization.
How can leadership at an organization effectively address a significant breach of contract?
With prompt communication
Avoiding confrontation does nothing in a breach of contract scenario. The best outcome available is likely to involve proactive communication with the other party. Breaches are sometimes a result of miscommunication or oversights.
Advising the other party of the issue might prompt them to address the issue immediately. Other times, a discussion might follow clarifying expectations because there was some kind of miscommunication. Occasionally, communication with the party in breach makes it clear that they have no intention of addressing the matter. At that point, it may be necessary to take additional steps.
With a civil lawsuit
Initiating civil litigation allows one organization to mitigate the harm caused by a breach of contract. In some cases, a pending lawsuit does what informal communication could not. It forces the other party to address the issue.
Quite a few business lawsuits eventually settle rather than going to trial. However, if the other party remains insistent about the refusal to address the issue, a lawsuit can lead to relief from the courts. Judges have the authority to terminate a contract. They can end one company’s financial obligations to the other.
They also have the authority to award the plaintiff damages for the provable economic impact of the contract breach. The lawsuit could even lead to an order of specific performance. Judges can enforce the contract or require that one party correct issues by fulfilling certain obligations.
Taking civil action after a significant contract breach with economic implications occurs can help protect a business. The civil courts can potentially hold another party accountable for violating a contractual agreement and help mitigate the harm to the affected organization.