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What are my options when a third party breaches their contract?

On Behalf of | Sep 22, 2023 | commercial litigation

Savvy business owners recognize that they cannot do it all. There are some projects that business owners are best to delegate to a third party. When that happens, these entrepreneurs know to look for an expert in that area, to find a third party to get the job done right.

Successful business owners take the time to complete thorough due diligence before moving forward with this arrangement. This can include sorting through the third parties that are available to complete the work, checking some of their previous projects to see if their work meets the project’s needs, and reaching out to the vendor’s previous clients for feedback before offering the third party the contract. Due diligence will also include negotiating the terms of the contract to better ensure the business’ interests are protected before, during, and after completion of the agreement.

Even with these safeguards, things can go wrong. One common example: a third party that fails to meet their end of the bargain. The vendor may have any number of excuses from supply chain issues to a low workforce. Whatever the reason, the business owners in this situation will try to reach a resolution. The process often begins with negotiations, reaching out to the third party and discussing the issue while reminding them of their agreement and pushing for completion.

If negotiations are unsuccessful and further action is required, the first step is to review the contract. It may require arbitration or mediation. These are essentially legally guided negotiations to resolve the dispute. If these fail or if the contract does not require these forms of alternative dispute resolution, the business owner may consider litigation.

How can I prove a breach of contract?

The rules vary by state. In Texas, the courts generally require the following:

  • Valid contract;
  • Plaintiff performed their portion of the contract;
  • Defendant breached the contract; and
  • Defendant’s failure to perform caused plaintiff injury.

Injury can be monetary.

What are my legal remedies?

If successful, remedies can include specific performance, or the requirement the third party complete the agreement as stated within the contract, restitution, and additional monetary damages.

Discovering a possible breach of contract is frustrating. However, by taking action to protect your business’ interests you can mitigate the losses and help better ensure your business gets back on track.