Handling a breach of contract with a third party

As a business owner, it’s reasonable that you’d have to work with many different entities and individuals. Third parties may provide essential services to your business, such as delivering specific items you sell to your location or delivering the basics to keep your business up and running. 

Normally, when you have a contract with another vendor, they will abide by it. This is because breaching a contract can be costly. It may not only lose them a contract but also lead to litigation and expensive legal consequences.  

How should your business handle a breach of contract? 

There are many ways to handle breaches in contract ranging from talking through the issue to heading to court. To start with, you need to turn to your contract to see if there is an arbitration clause or another clause that addresses what to do in the case of a breach of contract.  

Once you know if you are legally required to go into arbitration or mediation, you may want to reach out to the other party. Tell them that you are unhappy about the breach and that you’d like to remedy it.  

Things happen, supply chains change and emergencies sometimes come up. If the breach didn’t negatively affect your business this time and the third party is otherwise reliable, you may want to look past this breach one time and try to work out a solution with them. For example, they may alter their schedule to make sure you get a delivery earlier in the week in case of delays.  

If you did suffer losses, you could ask the other party to cover them by paying compensatory damages. Some may agree in order to salvage the relationship and contract. 

Finally, if you can’t come to your own agreement, then you may need to go through arbitration, mediation or to turn to litigation. Since a breach may be significant and have a negative impact on your business, it’s important to hold other parties responsible for not holding up their end of the deal. Know your legal rights, so you can protect yourself and your business against unfair losses caused by breaches of contract.