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What can you do if your vendor breaches the contract?

| May 3, 2023 | Partnership Agreements And Disputes |

Small-business owners often work with suppliers or vendors to carry out projects and grow the company. But what if the supplier falls short of your expectations? Even a minor setback could disrupt daily operations and result in losses.

Here are some steps you might want to take:

Review your contract

Go through the stipulations and clauses in your vendor contract. It should include specific clauses for payment terms, deliverables, standards for performance, deadlines, and consequences of a breach. This will help you see what clauses your vendor violated,  and whether you have reason to pursue legal action.

Gather evidence

Obtaining evidence is essential to showing that the vendor did not fulfill their obligations. Start compiling any documentation to prove the breach, such as emails, other correspondence, invoices, photos, and videos.

Get in touch with the vendor

A breach may occasionally result from miscommunication. At times, a discussion between both parties may be enough to resolve the issue. If successful, the parties will be able to come to an agreement and avoid going through legal action.

Send a demand letter

If the vendor is unwilling to discuss the problem with you, consider writing a demand letter outlining the broken contract clauses and any damages you may be owed. This strategy may succeed in persuading the vendor to address the problem and make the payment. However, be careful of what you say in the letter, because something in it could later be used against you (you may want to have your attorney review it before you send it).

Consider mediation

A lawsuit can be expensive and time-consuming to pursue and should be your last option as a small business owner. Consider mediation instead of filing a lawsuit. A neutral third party will help facilitate a conversation between you and the vendor so that an agreement might be reached.

An impartial mediator ensures both sides are heard and works through alternative resolutions. This can be advantageous for both sides as each party can save time and money.

Consult a lawyer

When all other options are unsuccessful, you might consider taking legal action. The breach must be material or substantial enough before you can pursue legal action.

A vendor breach of contract can have a devastating impact on your business. However, before pursuing legal action, it is best to plan carefully and seek advice. If your agreement lacks specific clauses or uses vague wording, you may need legal counsel to determine if your case is strong enough to claim damages.