September 24, 2025

Breach of Contract: What Business Owners Should Do First

Contracts are the backbone of every business relationship. Whether it’s with a vendor, client, employee, or partner, contracts outline the promises each party makes and what happens if those promises aren’t kept. Unfortunately, breaches of contract happen—and when they do, they can threaten your business’s stability, finances, and reputation.

If you suspect or know that a contract has been breached, here are the first steps every business owner should take.

1. Review the Contract Carefully

Before taking any action, revisit the written agreement. Look closely at:

  • The specific obligations of each party
  • Deadlines or performance timelines
  • Any clauses about remedies, damages, or dispute resolution (like arbitration or mediation)

Sometimes, what looks like a breach may actually fall within the scope of the contract’s terms. Knowing the exact language helps you determine if a real violation occurred.

2. Document Everything

Paper trails matter in legal disputes. Keep detailed records of:

  • Communications (emails, texts, letters) with the other party
  • Missed deadlines, incomplete work, or failures to perform
  • Any financial losses or damages caused by the breach

This documentation could be crucial evidence if the matter escalates to court or arbitration.

3. Assess the Impact on Your Business

Not every breach requires an immediate lawsuit. Ask yourself:

  • Did the breach cause a significant financial loss?
  • Is it minor enough that the relationship can be salvaged?
  • Would enforcing the contract cost more than the damages?

Understanding the practical impact will help you decide whether to pursue legal remedies or negotiate a solution.

4. Communicate with the Other Party

In many cases, a breach can be resolved through direct communication. Reach out formally—preferably in writing—to notify the other party of the breach and request compliance or repayment. Sometimes a letter from your attorney is enough to prompt action without going to court.

5. Explore Negotiation or Mediation

Litigation is costly and time-consuming. Mediation or negotiation may offer a faster, less expensive resolution. Many contracts even include a clause requiring alternative dispute resolution before filing a lawsuit.

6. Contact a Business Attorney

If informal efforts don’t resolve the matter, speak to a business attorney. An experienced lawyer can:

  • Review the contract in depth
  • Advise on whether the breach is “material” (serious enough for legal action)
  • Draft a demand letter
  • Guide you through arbitration or litigation, if necessary

Getting legal advice early often prevents costly mistakes and protects your rights.

When a contract is breached, the worst thing a business owner can do is ignore it. Acting quickly, keeping thorough records, and consulting with an experienced attorney can help you protect your business and move forward with confidence.