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Will contract litigation undermine a company’s success?

On Behalf of | Sep 20, 2023 | Uncategorized

Executives and entrepreneurs have to constantly weigh their options while considering what is best for the company that they own or operate. For example, when a supplier, client or former employee violates a contract, the company may suffer financial damages or major operational setbacks.

A breach of contract scenario is one of many situations in which an organization might initiate a lawsuit. Breach of contract lawsuits can lead to compensation for damages or a court order requiring specific performance or preventing future infringements. Many executives and entrepreneurs worry that litigation could damage the company.  After all, going to court can be relatively expensive, and court cases can draw media attention that could alter a brand’s reputation. However, that doesn’t mean that a breach of contract lawsuit will do more harm than good.

Many business lawsuits don’t end up in court

A significant percentage of business litigation cases settle outside of court. Whether the other party is an individual or another business, they will have an incentive to cooperate with an organization in most cases, as the consequences of a lawsuit could be relatively significant.

No one can predict what a judge might decide, but a settlement is something that the parties involved in the dispute can control. If the other party realizes that some consequences are likely inevitable because of a pending lawsuit, they may be more likely to cooperate with a business. It may be possible to suggest mediation or direct negotiations as a means to resolve the breach of contract matter.

Of course, not every former employee, client who refuses to pay or vendor who doesn’t make a delivery will change their behavior because another party files a lawsuit. If the matter does need to go to court, a business that prevails in a breach of contract claim shouldn’t have to worry about many negative consequences for the business.

The public generally recognizes the importance of upholding contracts, and it may even be possible to hold the other party accountable for court costs and other fees. Quantifying the impact that a contract breach has had on an organization may help an executive or owner better weigh their options and decide on the right approach to resolving the issue at hand.