3 Big Choices When People Break Contracts
You got the email and it sucks. You thought you had a solid customer, you were building your business in reliance on their revenue and now they don’t want to do business with you.
Insert your favorite excuse here on why they don’t want to do business with you: their industry changed, their aunt offers the same service you do and they just found out, or their dog ate your contract. It really doesn’t matter to you.
Back in the real world, you’ve likely made real word decisions based on their actions — maybe even hiring staff, not taking on other customers or buying supplies and inventory to service them. And not only will you not have their revenue, but you’ve actually now lost money.
What do you do?
We’ll explore some of your options in this article to help you back to your feet.
The 3 Big Choices
Unfortunately, this type of situation happens all too often in my legal practice. There are really 3 major choices and they aren’t cut and dry. Let’s run through them:
- Litigation/Dispute Resolution:
Drag that contract back out and look at how you handle disputes. Is it litigation? Or do you have arbitration, mediation or some other avenue specified? Whatever is in the contract you are generally bound to.
That raises a lot of questions. Is it worth it to litigate, arbitrate or mediate? And the answer is: it depends. I’ve had clients walk away from what appears to be a winning case because the cost is too high, and that can be an OK choice. In most states even if you win you will not get your attorney’s fees and costs back.
Sometimes it’s just not smart to put good money after bad.
The next option is to negotiate with the other side. Can we compromise? You don’t want to litigate, and they probably don’t either. See our recent article on what to do with an overly litigious opponent here.
Sometimes picking up the phone with the indirect (or direct) threat of litigation will get the other person on the phone and move to a solution that is better than nothing.
- Walk away:
Will your rights have been violated and you might have a winning case sometimes walking away and moving on is the right option. Really, how much time do you want to spend interfacing with a bad customer? The cost and energy drain on your business can be real.
If you aren’t sure which option is best, talk to an attorney experienced in such matters and get their opinion. If you find an attorney that isn’t overly litigious, they should be able to talk to you about the reality of all options in your circumstances and which way to might make sense for you.