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A Vendor Broke Your Contract, Costing Your Small Business Tremendously: What Options Do You Have?

Posted by John Marshall | Jul 19, 2021 | 0 Comments

If you're a small business owner, you're probably pretty familiar with vendor contracts. Whether you run a restaurant, retail operation, or manufacturing firm, you rely on vendors to provide on-time delivery of quality products, ingredients, merchandise, components, or whatever you need to make the wheels go round. Late delivery or sub-quality items can do more than ruin your day – such events can be costly in time, money, and customers. When a vendor is under contract, you have several options to mitigate damages and recover losses.

Breach of Contract

Your legal rights to recover are determined by the words contained in a legally enforceable agreement. Breach of contract is a legal term. It describes one party's failure to perform a contractual duty.

Vendor's Failure to Perform

It's important to identify the specific language of your agreement relevant to what you consider to be a breach:

  • the vendor's contractual duties
  • duty/duties vendor failed to perform
  • conditions that excuse delay or non-performance

Excuses for Non-Performance

When entering into a contract, the business owner and the vendor may foresee some events that would prevent or delay performance and put these contingencies into the contract. However, other things that may relieve the vendor from liability are unforeseeable.

Supply chain

In recent months, the pandemic and trade sanctions against foreign countries have caused disruptions in the supply chain. This may be a legitimate excuse for the vendor's non-performance, but it may not meet the criteria established by the contract to save your vendor from liability.

Force majeure

A force majeure clause excuses delay or permanent non-performance in the event of a major catastrophe. Act of God is another one of those terms. Contracting parties usually think they understand these exceptions — until a dispute arises.

Alternative Dispute Resolution

If you have a legally enforceable contract and a good breach of contract claim, you may be able to settle the matter without going to court. If the vendor is amenable, there are four ways to do this:

  • person-to-person discussions between business owner and vendor
  • discussions between your lawyer and vendor's lawyer
  • professional mediation with no obligation to settle
  • arbitration (arbitrator empowered to decide the question of liability)

Suing for Breach of Contract

A lawsuit is sometimes the best way to get the opposing party into a settlement frame of mind. And if that doesn't work, you will have the opportunity to present your claims and hold the vendor responsible in a court of law.

Consult a Professional

John Marshall is a highly experienced business lawyer. He provides clients with legal advice and effective representation to get the best possible results. To schedule an initial consultation, contact Attorney John Marshall at (949) 724-1116 or [email protected]

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