In today's Freedom Friday blog and email newsletter, I want to talk about something else in the construction industry, and in other industries, as well, and that is a breach of contract by a vendor or a supplier.  If you get into a dispute with a vendor or supplier, it can bring your production or your project to a complete halt.  What happens when one of your vendors or suppliers stops vending or supplying?  How can your small business be compensated for lost business, lost sales, or other damages?  In today's Freedom Friday blog and email newsletter, I'm talking about “How to handle a vendor breach of contract.”

To begin, what is a vendor?  A vendor sells or leases you materials, supplies, parts, services, equipment, or anything else you need to produce your product, provide your service, or operate your company.  Vendors are typically your second largest expense after labor.  You have a relationship with each vendor that is governed by a written contract with the vendor and that contract states how the vendor will be compensated.  The contract should also state what happens if the vendor fails to perform its function as provided in the contract.

A vendor can breach the contract by refusing to perform promises under the contract, doing something prohibited by the contract, or preventing another party from performing its obligations under a different contract.  A vendor can materially breach the contract, or immaterially breach the contract.  A material breach of contract is a completely irreparable contract and is cause for suing a vendor.  If a vendor commits a material breach of contract, a court can award your business damages for economic losses.

If you are dealing with a vendor breach of contract, you need to hire an attorney and provide him or her the contract itself, specific examples of the material breach, specific examples of your damages, a definition of performance standards (usually in the contract), and written notice of the breach.  All of this is necessary especially when a party has not fulfilled its contractual obligations.

There are steps your small business can take to avoid a vendor breach of contract.  The biggest step is to ensure there is clear communication between you and your vendor.  To avoid a vendor breach of contract, you need to understand the contract, follow the contract, create a documentary trail of communications and activity, and be careful when creating documents, including email.  You should also consider recording meetings and phone calls if you believe a breach of contract is on its way.

Thinking about starting a small business?  Or maybe your small business is having issues with contracts, leases, business partners, collection issues, or experiencing other barriers to growth?  Please contact me at [email protected] to schedule a FREE strategy session.

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