A company’s contracts help it control business operations and expenses. Employment contracts clarify what wages workers can expect and what duties they must fulfill to earn that income. Supplier contracts can help make costs and delivery dates more predictable. Client and customer contracts can protect a company’s income stream and allow it to charge penalties for late payments and other issues.
No matter how careful an organization is about the contents of its contracts, there will almost always be a few parties willing to openly violate contractual agreements. Individuals and other businesses may fail to deliver goods or services as promised, might not pay for what they receive from a company or might breach agreements preventing the disclosure of details about the agreement with others.
When a company discovers a significant or material breach of a contract, there may already be significant financial losses associated with that contract breach. Many businesses pursue breach of contract litigation against another party to seek damages or enforce penalty clauses included in their contracts when expectations aren’t met. Yet, this doesn’t mean that a dispute about a written agreement necessarily needs to be litigated in front of a judge for a company to resolve a matter favorably.
Most business lawsuits settle
While a company does not necessarily need to go to court to resolve a dispute, it may very well need to at least initiate a lawsuit. A party that has refused to perform services, deliver goods or render payment may ignore informal attempts to resolve the matter.
In a breach of contract scenario where the other party has refused to resolve the issue through direct communication, a lawsuit may be the only way to compel them to comply with the agreement they previously signed. An individual or business facing the embarrassment and expense of litigation might agree to settle the matter outside of court. Experts estimate that approximately 95% of business lawsuits end up settling before ever going to court.
The other party, facing the cost of court and the uncertainty of how a judge might rule on the matter, may be more willing to compromise or finally follow through with contractual obligations. They could also agree to other efforts to resolve the contract disagreement, including mediation.
Instead of avoiding litigation out of fear of how complex, time-consuming or expensive it may be, businesses coping with significant contract breaches may need to embrace the idea of initiating litigation as a way of moving negotiations on the matter forward. Holding another party accountable for a contract breach doesn’t necessarily need to lead to court but may involve filing court paperwork with the assistance of an experienced attorney.