Vendors can play an important role in helping a business with routine operations. The materials that they provide allow a company to maintain its facilities or offer products to the public. Carefully outlining the expectations for a vendor in a contract helps a company keep its operations smooth and predictable.
Unfortunately, vendors do not always uphold the contracts that they execute with business clients. In some cases, vendors may fail to fulfill their obligations, at which point it could become necessary to take legal action. Especially when a vendor’s breach of contract leads to financial losses, litigation might be the most appropriate response. The following are some of the common ways that vendors breach their contracts and potentially harm business clients.
Failing to deliver on schedule
One of the most common complaints against vendors is a failure to fulfill contractual obligations according to the schedule. Businesses that rely on certain supplies to offer goods or services to the public require regular deliveries. When a vendor fails to deliver goods as scheduled, the client may have to idle a production plant or default on a contract with one of its customers. That could lead to significant losses.
Charging more than the agreed-upon price
Vendor contracts typically include very clear terms about the price that the client pays. Vendors sometimes lock themselves into a multi-year arrangement and may begin to regret that decision when the market shifts. Instead of renegotiating the contract, some vendors simply make the unilateral decision to charge more for what they provide or deliver less, which could leave a business in a scenario where they either pay more than they have budgeted for or risk not having the necessary materials and resources.
Breaching confidentiality agreements
Vendors who provide materials often know more about a company’s operation than the general public. Organizations may try to protect against the exposure of trade secrets by including confidentiality agreements in their vendor contracts. Vendors might publicly share information about the relationship they have with a business or even the details of the arrangement between the two parties. An organization might also be at risk of a vendor selling details to competitors that could allow them to reverse engineer a product or process.
A vendor’s contract breaches can have a significant and negative impact on the organization that has negotiated the contract with the vendor in question. Pursuing business litigation is a reasonable reaction to a breach of contract that has business implications and that cannot be reasonably resolved in other ways.
