Experienced. Dedicated. Result-Driven.

  1. Home
  2.  • 
  3. Contract Disputes
  4.  • How a breach of contract can affect your business

How a breach of contract can affect your business

If any party you work with, be it your partner, an employee or a supplier, breaches their side of a contract to which you both are parties, your business can be harmed significantly. That’s why it’s vital to prevent any possibilities of a breach of contract by writing clear contracts, doing due diligence to ensure you enter into agreements with reliable parties and drafting binding contracts that are enforceable.

However, a breach of contract may still occur despite doing your best to avoid this scenario. In that event, a breach may affect your business in the following ways.

Disruption of operations

A breach of contract can affect your business’s operations. For example, if a supplier fails to deliver goods on time, you may need to halt some operations.

Further, if an employee breaches their agreement, you may need to ask them to leave to investigate the matter and, in turn, determine the appropriate disciplinary action. Since they won’t be coming to work, their duties may remain pending or you may need to add tasks to other employees, which can result in delays.

Additionally, if you take a party to court for breaching an agreement, you will attend hearings. While doing this can help you recover damages, you will spend time outside work, which can disrupt operations.

Loss of money

A disruption in operations generally can lead to a loss of money. Using the delayed delivery of goods example – if you don’t have raw materials for production or goods to stock your shop, you will incur financial losses.

A breach of a partnership agreement can also lead to a loss of money. For example, when your partner manipulates financial transactions or discloses company secrets, this could harm the business financially.

A breach of contract can negatively impact your business, and these are just a few of the examples illustrating how and why. Consider seeking legal guidance to understand how you can recover from the potential losses you’ve incurred, are incurring or may incur, if your business is being affected by a breach of contract scenario.