Imagine working all week on advancing your business relationship with another company. You exchange contract offers. You sign. You start work.
Then… everything stops.
Deadlines are missed. Payments are withheld. Signed agreements are ignored.
Now your two companies, once valuable partners in business, are staring down the barrel of an extremely costly lawsuit.
Here’s the problem…
Sure, most business owners know these scenarios happen. But when faced with a corporate breach of contract, the average owner doesn’t know what to do next.
Should they file a lawsuit? Hire a mediator? Hash it out over a conference table?
Deciding wrong could cost you tens of thousands in legal fees and months of wasted time.
What You’ll Learn:
- What Is a Corporate Breach of Contract?
- Negotiation: Start Here
- Mediation: The Smart Middle Ground
- Litigation: When It Has to Go to Court
- How to Choose the Right Path
What Is a Corporate Breach of Contract?
A corporate breach of contract occurs when someone who entered into a legally binding agreement fails to fulfill their end of the bargain.
Need some examples?
It could be:
- A vendor not delivering goods on time
- A client refusing to pay for services rendered
- A business partner breaking the terms of your signed agreement
Corporate breaches range from mild to severe. Some involve accidentally missing deadlines. Others are material breaches that deal massive financial blows to the heart of the contract.
This distinction is extraordinarily important when you need to decide how to move forward.
Contract disputes account for 46% of all civil filings in state courts nationwide. But here’s the thing: nearly all of those disputes don’t have to end up in front of a judge.
Addressing a corporate breach of contract quickly with trusted legal advisors in Chicago will allow you to resolve the dispute before it becomes a full-on battle.
Negotiation: Start Here
Negotiation should be your first step in almost every case and here’s why:
Negotiation is quick, confidential, and doesn’t require involvement from outside parties or the court system.
Both parties meet to discuss the breach of contract and attempt to work towards a solution. Nobody files fees. No judges. No records posted on the courthouse door.
Ideal negotiation scenarios are where:
- The relationship between the two companies remains strong
- Both parties made an honest mistake
- Bad press/reputation is a concern for both sides
- Timing is important, and a quick solution is desired
However and you’ll see this a lot if the other party is acting in bad faith, won’t agree to terms, or constantly moves the goalposts, negotiating directly will quickly come to a halt. This is when you call in the reinforcements.
Mediation: The Smart Middle Ground
Mediation is the perfect balance between negotiating on your own and going straight to court.
During mediation, a neutral third-party known as the mediator works with both sides to reconcile the dispute.
Here’s the kicker: Mediators can’t impose rulings or decisions. They can only help both parties reach an agreement.
Consider this…
Between negotiation and mediation, 80–90% of all commercial disputes are resolved prior to going to court. That’s right the majority of legal disputes never make it to trial.
That’s because mediation is great for corporate breach of contract because:
- It’s confidential not legally binding and information can’t be used in future courtroom deliberations
- It’s quick most situations are resolved in a matter of days or weeks, not years
- It’s cheap mediation will always cost less than taking a dispute to court
- Preserves relationships you and your ex-business partner can still get along after the fact
What’s not to love?
If the other side is willing. Mediation can’t be forced on someone who doesn’t want to participate. If they simply refuse or show up unwilling to negotiate in good faith, you’re left with one option: litigation.
Litigation: When It Has to Go to Court
Sometimes you just can’t avoid it.
Litigation is long, costly, and stressful. But going to court is sometimes necessary to protect your business.
You’ll want to litigate if:
- The contract breach is severe.
- The other party is acting in bad faith.
- You’ve already attempted (and failed) at negotiation.
- You need a court judgment or order to back your claim.
Bear with me here…
Small businesses pay a median cost of $91,000 when contract disputes go to trial. Let that sink in.
And litigation is a matter of public record. Everybody. Knows. About. It.
Even if you win your case, that negative press can haunt your business for years to come.
When should you litigate?
When your company has suffered severe financial harm due to a corporate breach of contract. When you’ve already gone through negotiation (and mediation if needed). When a settlement just isn’t an option.
You know the other party is trying to weasel out of a contract they willingly signed. Litigation and having a seasoned attorney on your side is the best way to ensure justice is served.
How to Choose the Right Path
Negotiate, mediate, or litigate. Which one do you choose?
It all comes down to a few factors:
- How serious is the breach?
- Is there any benefit to continuing the business relationship?
- How soon do you need to resolve the issue?
Here’s what you should remember:
- Negotiate first. You can always escalate, but direct negotiation is a perfect first step in any dispute.
- Try mediation second. If negotiation fails and you have an interest in preserving the relationship, consider mediation.
- Litigation is your last resort. Accept it won’t always be necessary, but if you must litigate, know you’ve left no stone unturned.
Corporate breach of contract disputes are rarely cut-and-dry. Very few will need to see the inside of a courtroom. But having a qualified legal team on your side early can help you reach a solution you might not have realized was possible.
The Bottom Line
Getting hit with a corporate breach of contract is like a gut punch. No one likes it.
But knowing what steps to take next doesn’t have to be complicated. Start by negotiating. Escalate to mediation if necessary. And if you must, litigate!
Just make sure you have good lawyers on your side. The sooner you bring experienced legal eyes onto your problem, the more options you’ll have to right your business ship.
