When parties sign a contract, the understanding is that both sides intend to carry out the promises they make. However, it sometimes happens in the business world that a company finds that there is no way for it to fulfill its contractual obligations. When this is the case, it is important to proceed in a manner that minimizes the damage caused by the breach, and accordingly, the risk of a nasty lawsuit. In other words, it is possible to “plan” to breach a contract, rather than simply defaulting. Getting an attorney proactively involved – early in the process – can save large sums of money down the road.
Communicate & Negotiate
Open communication is key. Contracts can often be re-negotiated to accommodate changing circumstances. Most companies are not interested in harming their contracting partners. When I encounter particularly difficult breach-of-contract litigation, it usually occurs in a scenario where the breaching party has attempted to conceal the circumstances, rather than attempting to re-negotiate.
When negotiations are not enough to resolve a contract dispute, a good attorney can assist in ensuring the default is undertaken in a manner that minimizes damage and ensures that a party will not be found to have acted in bad faith (which can lead to punitive damages). Also, a thorough understanding of complex commercial contracts may allow the advising attorney to exploit clauses that will excuse the defaulting party or provide a “loophole” that could apply in a given situation.
Choose Experience When a contract does end up in litigation, it is critical to have an experienced trial attorney who has specific experience in the area of commercial contracts. Many attorneys who have experience in other areas of the law have never been involved in a complex commercial contract trial. These cases have their own unique challenges and techniques. I have seen many strong cases fall apart because of the lack of skill and experience of the lawyer. Don’t let your case be a guinea pig for an inexperienced attorney!