In California, when one company breaches a contract, the result is often a lawsuit. Sometimes negotiations and conversations can’t quickly resolve the issue between the two parties. In that case, the court system is the only way to compel a return to the contract or obtain financial compensation for the breach.
There are many types of business contract that can exist between two or more companies. For example, one company may agree to supply lumber to another company of a certain size, shape, quality, and quantity for a specified period. The contract defines the parameters of the required lumber, the price, and other key elements of the deal.
Contracts also specify the penalties for each party if one chooses to break the contract. Therefore, such a minor issue, like the lumber delivery being a few hours late, will generally not lead to problems, as long as the contract does not require a particular delivery time with its strict language. However, lumber of the wrong cut or quality is likely to be a breach and needs to be corrected immediately, or the buyer can take legal action.
If the breach is severe and prolonged, and the companies are not able to work out the issue by talking about it, then the next step is litigation. Of course, litigation will be costly and likely damage the company’s relationships. Still, it might be the only way to get financial compensation for the other party’s failure to abide by the contract.
Litigation isn’t always required to resolve a contract dispute between companies, but it can be an effective tool.