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3 ways a vendor’s breach of contract could hurt your business

On Behalf of | Nov 30, 2021 | Business Law

Finding the right vendors is a major part of building a successful business. You need reliable suppliers whether you run a retail business or a manufacturing operation. Products, raw materials or even ingredients for a restaurant all come through various vendors.

If you cannot count on having the necessary materials at your business in accordance with a vendor contract, you could easily suffer significant financial losses. If reaching out to the vendor to alert them to the issues doesn’t result in a prompt explanation, you may need to take legal action.

Holding a vendor accountable for a breach of contract may seem like a big step to take, but chances are good that their failures will cause provable financial losses for your business. Once you quantify those damages, you can file a breach of contract lawsuit. How does a vendor’s breach of contract potentially harm your company?

By causing a loss of productivity

If you need certain materials to produce what your company sells, you could incur major costs because you thought you would be able to do business and then had to shut down for the day. You could also have additional material costs if you have perishable products or chemicals that went bad while you waited for the vendor to deliver.

You have to make alternate arrangements at a loss

A big part of the reason that you lock in vendor arrangements via contract is to protect your company from price fluctuations or opportunism. When you need certain materials or products right away, some companies will charge you a premium.

While you may be able to avoid idling a production line or the loss of perishable goods by buying through an alternate supplier, you could take a major hit in how much you pay for last-minute alternative supplies. 

You might face your own breach-of-contract claims

When you don’t have materials or supplies that you contracted for, you may find yourself in violation of your contract with other businesses or individual customers and clients. Not only might you incur expenses relating to defending against those claims or settling them, but you could also suffer long-term losses related to the damage to your reputation caused by an unreliable vendor.

Recognizing the numerous ways a vendor’s actions could cause financial damage to your company can help you take the right action in court.