How To Avoid Breach Of Contract (Or Minimise Its Impact)30th Apr 2019
As a commercial litigation solicitor, the three words I hear most from clients phoning for help are ‘breach of contract’.
Either they haven’t been paid on time (if at all). Or the goods and/or services they were promised haven’t materialised. And the problem needs sorting quickly and cost effectively.
But the issue runs far deeper than who’s at fault…
The real source of the contract dispute is often the paperwork itself (not the business leaders who are at loggerheads). Your contract may have loopholes because it was sent out in a hurry…without sufficient legal checks by your in-house team. And simple loopholes can so easily become expensive pitfalls.
You’ve Grown – But Has Your Paperwork Kept Pace?
Many of the firms we deal with turn over £5 million+ and employ 50+ people. They are typically engineering and manufacturing specialists. They could be based anywhere in the country but are often in Dorset or Hampshire.
Many have grown rapidly through inspiring innovation, technological superiority, admirable commercial sense and sheer hard work. They’re busy; it’s full speed ahead – but sometimes that speed of growth outstrips the systems that keep the ship steady.
Legal contracts created when the business was much smaller may not be suitable now it has moved up into the bigger leagues. The company’s paperwork may not have kept pace with its acceleration into new, larger markets – especially if those markets are overseas.
Has A Long-Term Customer Or Supplier Defaulted?
Breach of contract is always worse when it involves a trusted long-term trade partner – threatening or even jeopardising a long and harmonious relationship.
How did it come to this? Step back and analyse the situation. The warning signs may have been there for some time. And we don’t just mean the other side’s financials…
Hand on heart, as a supplier were you always at their beck and call because they were a much-loved client?
Does this sound familiar? If so, it has all the hallmarks of what the military describe as ‘mission creep’. Going the extra mile. All on a friendly handshake. But your work went beyond the precise terms of the contract. And now they won’t pay. Suddenly it’s not so friendly anymore.
Or if they were the supplier, were they always as good as gold? Again a friendly handshake. So you expected them to be true to their word as usual. But what if they didn’t go above and beyond as promised? What if they just stuck to the contract? Now your big export deal is in jeopardy because your supplier let you down. Again, not so friendly anymore.
How Do I Solve The Problem?
No-one likes going to court. It’s expensive, time-consuming and you have far more important things to do.
The answer is to get a commercial litigation solicitor involved as soon as possible to nip the problem in the bud. By responding swiftly you can solve the problem with a well-worded solicitor’s letter or – if other solutions are needed – alternative dispute resolution such as mediation or arbitration.
Do not delay. The longer you leave it, the worse it becomes – and the more likely it is to have unfortunate side-effects such as loss of business reputation or negative PR.
How To Prevent Contract Disputes
If you Googled ‘breach of contract’ to get here then discussing how to prevent it may be locking the stable door after the horse has bolted. But you need to know how to stop it happening again.
And if your situation is not yet that severe – if it’s still at the early stages – then you need to know how to stop the threat of an impending breach from becoming a reality.
Either way, you need to think about preventative measures. The best way to do that is to have your contracts reviewed by a commercial solicitor – ideally a disputes and litigation specialist who can spot loopholes likely to cause trouble in the future.
Get Expert Legal Advice
As experienced commercial litigators, we offer expert advice to help you prevent and solve contract disputes as quickly and cost effectively as possible to avoid business disruption.
To discuss your options, email Coles Miller commercial litigation solicitor Dion McCarthy (01202 355695).