What Happens When Contracts Go Wrong?
When you enter into a contract that requires performance from another party, have you thought critically about what happens if they don’t deliver? An often-underestimated but essential part of any such agreement is the remedies clause. This section outlines the consequences of non-compliance.
In this vital video, Phil Crowley, founder of Crowley Law LLC and a seasoned business lawyer, explains why you must proactively think through and define remedies in your contracts before any problems arise.
Key Elements of Your Contract’s Remedies Clause
Key considerations for your contract’s remedies clause that Phil discusses include:
Defining Your Rights: What If They Don’t Deliver?
What are your rights if the other party fails to perform their obligations?
Monetary Recovery: Getting Your Money Back
Will you get your money back? Is it a full refund or a proportional amount?
Claiming Damages: When Non-Performance Costs You
Do you have the right to sue for damages incurred due to their non-performance?
Limitations on Damages: Setting the Boundaries
Are there any caps or limits on the potential damages that can be claimed? (This is a critical point to negotiate.)
Practical Example: Real-World Remedies in Action
Phil illustrates this with a practical example: imagine investing significant money in manufacturing equipment, specified and chosen by a vendor, only to find it doesn’t work. Your contract should clearly outline your remedy – at a minimum, the ability to recover the funds spent on faulty equipment.
Protect Your Business: Proactive Remedies are Non-Negotiable
The core message is clear: thinking through potential negative outcomes and clearly stipulating the remedies within the contract ahead of time can save you immense headaches and financial loss if a breach actually occurs. Don’t wait until disaster strikes to figure out your options.
If your business relies on contracts for performance, understanding and defining remedies is non-negotiable.
