Speaking on the uncertainties of absinthe, Oscar Wilde quipped that “After the first glass, you see things as you wish they were. After the second, you see things as they are not. Finally, you see things as they really are, and that is the most horrible thing in the world.” Wilde’s experience, however, is not limited to absinthe. As many a business can relate, a failing contract can have much the same effect, as the goodwill built at the beginning of a commercial relationship dissipates amidst a string of broken promises that ultimately lay bare the truth: for whatever reason, the agreement won’t or can’t perform.
In such situations, it may be tempting to file suit. And sometimes that is the best option. But there may be other considerations that ought to be weighed in deciding whether to pursue legal action – and when. Here are several factors that may be helpful in determining whether to knock on the courthouse door:
- Assess the Severity and Potential Consequences
If someone breaches the terms of your contract, it can feel very personal, because it is. The question, however, is whether this breach is worth the fight, and if yes, then what type of fight? As a rule of thumb, taking inventory of the severity of the breach and its potential consequences for your business is a good starting point. Typically, the scope, scale and severity of your response should at least somewhat correlate to the scope, scale and severity of the consequences for your business. But even if a breach is serious, there may be other considerations that make legal action a less appetizing option, especially if there are alternatives.
- Weighing Your Resolve
Your business may not always have the choice to avoid litigation, especially if it is the one being sued or significant matters are at stake. But, if you are in the position to decide whether to pull the litigation lever, a good early round question is whether your business is prepared to dedicate the money, time, personnel and resources necessary to win the case? If the answer is no, then litigation may not be right for you.
- Weighing your Opponent
It is not always possible to know your opponent. But if you can weigh their determination and available resources and reputation in business and litigation more broadly, that can be a helpful factor in deciding next steps.
- Exploring Alternatives
While situations can vary, you typically have options in addressing a contract breach before resorting to the courts. Assuming breach notices have been delivered and cure periods have expired per the contract terms, some of these options may include:
- Taking no action and instead finding an optimal way to terminate the contractual relationship.
- Privately negotiating a mutually acceptable business accommodation, which may not directly address the breach at issue, but which replaces much of the value lost in the original deal due to the other party’s breach.
- Lawyer’s letter, in the form of a request to cooperatively investigate a possible breach and inviting ways to determine potential cures and business accommodations if a breach is found.
- Lawyer’s letter, as a formal demand or cease and desist.
- Pre-litigation mediation.
- Weigh the Other Party’s Response.
Listening to the other side, and what it is and is not saying, is important to the process. Whether litigation makes sense depends on how stubborn the other party may be, or the level of deception or bad faith the other party has exhibited.
- Secure Experienced Counsel
Deciding to pursue litigation is a business decision. And it’s not always an easy one. Utilizing legal services from an experienced and effective business litigation attorney early in the process can be important in understanding your rights and options, and to developing well-considered strategies and alternatives.
At Baker Jenner LLLP, Your Success is Our Business™. If you would like to discuss how we can work together to determine your best next step, schedule a consultation by calling (404) 400-5955 or via our online form today.
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