Does a breach of a business contract always lead to litigation?

On Behalf of | Aug 7, 2023 | Business Law & Litigation |

Business contracts help make expenditures predictable and limit an organization’s liability. Once a company has negotiated a contract with a vendor or service provider, there is an expectation that both parties will abide by the agreement.

Unfortunately, contract breaches are very common. Some of them are unintentional and may occur because of supply chain disruptions, communication challenges or health issues. Other times, one party might enter into a contract without any legitimate intention of following through with their promises to the other party. Significant contract breaches can disrupt a company’s operations and lead to financial losses. Is going to court the only solution for resolving a significant breach of contract?

Many disputes settle before court

When one party doesn’t complete a project or deliver supplies to the other, the organization impacted by the breach will need to communicate the issue to the other party and provide documentation of the breach. Occasionally, reaching out to communicate about the potential breach of contract will be enough to push the non-compliant party into resolving the matter. Other times, direct communication and even formal notice of the contract breach may go ignored or might even damage the working relationship between the parties. At that point, the party affected by the breach may very well choose to initiate a lawsuit.

Pursuing a breach of contract lawsuit in civil court opens up an opportunity for the affected party to receive damages from the party that breached the contract. A judge might also order specific performance to compel one party to complete their contractual obligations or dissolve the agreement so that neither party has obligations to the other in the future.

Given the uncertainty of going to court, businesses and professionals facing a lawsuit related to a business contract are often eager to settle outside of court. In many cases, the decision to file a lawsuit helps establish how serious one party is about upholding the contract and may provide motivation for the other party to cooperate. In some cases, major contract breaches will proceed to court, particularly if there is no room for compromise in the matter.

Pursuing civil litigation is not always necessary but is usually among the most effective means for resolving a significant contract breach. With that said, every situation is unique and seeking personalized legal guidance before committing to a specific litigation strategy is usually advisable.