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Why Breaking a Business Deal is a Bad Idea When You Have a Contract

On Behalf of | Apr 22, 2020 | Business Litigation |

Contracts are just a part of business — but not every contract turns out to be a keeper. You may have a very good reason for wanting out of a deal with another company, but there are also some hefty reasons to keep your end of the bargain.

Here’s what can happen when you don’t fulfill a business contract:

  • You could damage your business relationship. A broken contract can cause the other party to feel insecure about any future deals.
  • Your business reputation could suffer. Even if you don’t plan on doing business with the other party again, your reputation in the industry could take a hit. Many industry leaders “talk,” and word gets around rather quickly when someone breaks a deal.
  • You could be sued for breach of contract. Unless your deal specifically allowed you to withdraw your commitment, you may end up facing off in court with the other party.
  • The time and expense may not be worth it. If you’re sued, it will likely draw you away from your business and cost significant amounts of cash in legal fees. If the deal involves some relatively low dollar figures, it may be cheaper to keep it.
  • You could be forced to keep your bargain anyhow. There are avenues open to the other party if they’re wronged by your refusal to comply with the terms of the contract. You could be ordered to pay compensatory damages or required to do some specific performance that complies with the deal, among other consequences.

It’s often better to stick with a deal once you’ve made it — unless there’s a clear way out that won’t put you in breach. Even so, it’s smarter to avoid a problem in the first place by having experienced legal advice about your contracts from the very beginning.