A contract is a written agreement that explains what obligations each of the parties has to one another. Once your business has executed a contract with another party, whether you sign an agreement with a worker, a service provider, a vendor or a customer, you expect that they will fulfill their obligations to your business.
Unfortunately, some people or companies fail to uphold their contractual obligations to others, which can hurt your company and lead to court. The five issues below are common problems that arise after signing a contract.
Some of the most frustrating and expensive contract issues are anticipatory breaches. You know before anything happens if the other party will not fulfill their obligations because they inform you of that upcoming failure.
You can take action when you have proof of the other party has already breached the contract, and you can take them to court when you have documentation showing that they intend to violate the contract and ask for court intervention.
Non-delivery of goods
If you arrange for your vendor to provide you with bulk quantities of a chemical that you require for your business’s manufacturing operations, not getting a delivery as scheduled can be a source of hardship.
You could incur major costs, such as staffing expenses when workers have nothing to do but stand around and wait. You can lose big orders and suffer damage to your reputation because a vendor failed to deliver goods as agreed.
Similar to non-delivery, non-performance involves one party to a contract not providing a service as agreed in their contract with another party.
If you pay for IT support from an outside company, only to have them refuse to come when your servers go down, their non-performance could cause major interruptions for your business.
You need soft wheat to make the biscuits that your restaurant has become locally famous for, but the vendor can’t seem to locate the soft wheat you typically order.
Without notifying you, they deliver a winter white wheat instead, which would undoubtedly affect the flavor and texture of the finished product. If a vendor substitutes materials, they should communicate with the customer before doing so.
Poor workmanship or materials
Sometimes, one party to a contract technically fulfills the agreement by performing a service or delivering supplies, but what your company receives is of a substantially lower caliber than what you usually receive for had reason to expect.
If you go to court over a breach of contract, the judge hearing the case could invalidate the contract, refund payments you have made, award you damages or even order the other party to follow through with the promises they made in the contract.
Learning more about the common issues that lead to contract litigation can reduce the impact of another party’s failure on your business.