How To Handle A Breach Of Contract

Dear Entrepreneur,

Conflict is inevitable in Business.  The most common business argument is breach of contract i.e Someone failed to follow through on a promise. It could be as simple as not paying a bill, or it could be poor workmanship, or even misrepresentation of what someone’s goods or service can do for you. A dispute can be two sided, one party may claim to be cheated whilst other party makes the same charge.

Disputes are traditionally resolved through the court system which involves a trial where a judge decides who is right or wrong, however businesses are now considering faster and more effective models like negotiation, mediation and arbitration – often called ADR or alternative dispute resolution. It is essential for a business owner to reduce conflict to the barest minimum because it is a drain on profits however in the event that a dispute becomes unavoidable it is important  to note the following.

#Establish The Nature Of The Breach

The first step is to determine the type of breach and how it affects your company. A breach will typically fall into one of two categories:

  • A material breach, which has caused or might cause significant harm. An illustration would be if you hired an interior design firm to redesign your office for a crucial business meeting but they didn’t show up.
  • An immaterial breach, where substantial damage is not likely to occur. An example is where you have a contract with a supplier to deliver goods to you every Tuesday, and on one day the goods do not turn up until a Wednesday

#Check Your Position

Your first step should be to check the facts before starting any form of dispute resolution procedure. Look at what was agreed, what actually happened and why. Try to quantify the loss suffered by each side in the dispute. Assess how strong your case will be if the dispute goes to a formal dispute resolution procedure. You should also consider the other party’s ability to pay, particularly if you are considering launching costly legal action. There is no point taking someone to Court only to find that they are insolvent leaving you unable to enforce judgment or recover your costs.

#Explore Negotiation

Commercial litigation can be very expensive, stressful and time-consuming and should be the last resort in resolving a dispute. Negotiation is the back-and-forth communication between the parties in conflict with the goal of trying to find a mutually agreeable solution. You may negotiate directly with the other party or you may hire a lawyer to negotiate on your behalf. Negotiation allows you to participate directly in decisions that affect you and your business. A negotiated agreement can become an enforceable contract.

#Engage A Lawyer

It is essential to be represented by a lawyer who not only has an understanding of the law but of business as well. A good lawyer will not unnecessarily prolong or aggravate the situation so as to earn bigger fees but should rather work with you to arrive at the most effective and cost efficient dispute resolution process. Your lawyer will need to see documents relevant to the matter, such as contracts or proposals. The most difficult suits to resolve are those where the parties have an oral agreement and the two parties have different recollections of what was promised so it is important to clearly document business activities.

SME Business Support Nigeria

Parting Thoughts.

Business disputes distress staff and stakeholders, reduce performance, compromise delivery, damage business relationships and puts your business at risk. Business Owners should always look for constructive ways of resolving disputes that save time and money and minimise damage to important relationships.

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