Small business owners often count on a variety of professional relationships to keep the company afloat. These can include other companies, suppliers, employees, partners and clients. As they’re managing those relationships, there may be times when a contract becomes necessary.
For a small business, contracts can provide protection against being taken advantage of. A contract outlines the key terms of a business arrangement, such as pricing, deadlines, deliverables, payment schedules and dispute resolution procedures in a clearly stated manner.
How do breaches affect small businesses?
Small businesses often operate on a tight budget and short deadlines. Because of this, contract breaches can greatly impact them in a way that’s much more intense than what would happen with a larger corporation. Oftentimes, breaches come with financial implications that can ripple through the company for a considerable time to come.
The type of breach and the circumstances determine how the small business is impacted. For example, if the breach is a failure of a supplier to provide a component of a product, that could mean production of the company’s goods is delayed. This could make the small business seem unreliable to customers and harm the company’s reputation.
When a contract breach occurs, the parties can sometimes come to a suitable resolution together. Legal action may be necessary if a mutual resolution isn’t possible. But that may not be possible if there is a clause insisting you use alternative dispute resolution methods. Working with someone familiar with these matters may help to evaluate the available options to determine what’s in the best interests of the small business.