Whether you run a taco restaurant or a manufacturing facility, you sign vendor contracts because you need predictability in your supply chain. You need to know the cost of components and materials. You also need to know that you can rely on getting those items as frequently as is necessary to ensure uninterrupted business operations.
Unfortunately, vendors can fail their supply obligations with little forewarning. Does the company that failed to deliver on its contractual obligations just get to walk away without consequences despite the impact on your operations?
Your contract may tell you what to do next
Some companies negotiate specific terms for a breach-of-contract scenario when they originally make an agreement. You may have to follow the vendors specific protocol as outlined in your contract.
Before taking any other steps, it is usually smart to look over the contract itself and double-check your internal records to verify that a breach actually occurred. If it did, you can either follow the steps prescribed in the contract or move on to the next step, communicating with the vendor.
Try talking directly about the issue
Everything from a family emergency to an external supply chain disruption could impact your vendor’s operations. Before you take legal action against them, it is probably a good idea to reach out to them directly.
You may want to even send an informal communication the first time if you hope to preserve the dynamic of your relationship. If they don’t respond or if they refuse to follow through on their obligations to you, you may want to send a formal letter. After that, filing a civil suit will likely be the next step.
Your legal claims could lead to a settlement or to court
Many companies arguing about a breach-of-contract situation will resolve the matter without outside help. Filing a civil lawsuit shows that you mean business and can motivate the other party to negotiate a settlement with you.
However, you may need to go to court if they refuse to cooperate or acknowledge the impact of your actions on your company. A judge could order them to fulfill the contract or even a word you monetary damages depending on the scenario. Taking the right steps to respond to a breach of contract can help you solve the issue while minimizing its impact on your company’s finances.