One of your customers, suppliers or partners has breached their contract with you — and you’re not sure how to handle the situation.
What’s the first thing you should do? Look at your contract. A well-written contract should protect you in the event of breaches and disputes.
Every situation is different, but your contract can provide clarity
Let us imagine you run a catering business. One of your customers canceled the day before an event. You had already spent money on supplies. You had spent time prepping the food and booked staff to help you for the event — and they had to be paid even though they didn’t work.
Here are some things to consider about your situation:
- What does your contract say? Does your agreement have a cancellation policy? If so, how many days out can someone cancel, and what are the penalties? What remedy for a breach does your contract require? Is there a mandatory arbitration clause or something else?
- What has the breach cost you? Your contract should specify what the other party must pay if you incur losses. Are they required to pay just the wholesale cost of the food you purchased or the full cost of the event?
- Who is the client? Is this a first-time client and one-off booking? Or is it a long-standing customer who will book you again? Is there a way to negotiate an agreement that will work for you both?
- Do you want to work with the client again? Does it matter to you if you keep the peace with this particular client? Is the relationship’s value enough to offset your losses?
- What stance is the client taking? Are they willing to reimburse your costs, or are they refusing to acknowledge they are in the wrong? Are they even taking your calls?
If you take a contract dispute to court, a judge will look at what the law says and what the contract says. They will not consider the more personal factors which can be so important to you as a business owner. If you have an issue that you cannot work out between you and the client, consider legal help. There are ways to resolve contract issues that do not involve going to court.