One of the hardest lessons a business owner can experience is the failure of a business relationship – whether with a vendor, a business partner, or a client. Regardless of how carefully you screen any of these people or how formal your agreements with them, when the other party doesn’t perform, deliver results, contribute, or meet financial obligations, your business pays a high price. This failure is also costly on a personal level because it drains your energy and changes your perspective.
In the past few years – since starting my business – I have had lessons about vendors, clients, and business associates. The choices made by these individuals and companies have been difficult to understand. For instance, I placed a deposit for professional services and signed a contract for those services and resulting product. The vendor didn’t complete any aspect of the process or deliver a single, tangible work product. When challenged about it, the explanation was that the partnership hid issues and would I agree to void the contract. I agreed to void the contract if I got my deposit back.
Two years and counting… I have not yet received the deposit nor has the vendor provided content or service. The contract is void for non-performance, but the deposit is still in the hands of the vendor.
What are the options when dealing with this type of situation?
Better Business Bureau – file a complaint
Small Claims Court – file a lawsuit (items under $10,000 in NC in 2015)
Mediation – generally used as a means of keeping things out of a formal court of law, in mediation an independent third party is paid to hear the merits of each party’s position. The agreement is binding.
Do Nothing/Write It Off
Your choice is dictated by cost, time, level of documentation, agreements, and stress level. Any time things don’t go right in a relationship, be it with a business partner, vendor, or customer, dealing with the fallout takes resources, and that puts an additional load on top of what has already happened. When making the decision about what to do, it is necessary to separate the elements and motivations for making the investment in pursuing “resolution” – the personal from the business, the principle from the reality, and the emotional from the logical.
As humans we are emotional creatures whether we want to admit to it or not. Often our anger, disappointment, and frustration drive our choices. We should not ignore the emotional impact which comes with failed relationships and financial repercussions. We do need to put them into perspective so they don’t worsen the immediate situation.
For instance, if a business partner has failed to live up to operational and financial obligations, remedies are usually spelled out in the formal agreements (if there are any). While it is important to have those agreements and to have details spelled out, when the other person doesn’t live up to the terms of the agreements, then taking them to court is certainly an option.
The drawbacks of court actions may include time, money (legal fees, etc.), your time away from the business, stress, and so on. You may be able to get into court quickly and get a judgment, but collecting that judgment is yet another challenge.
Sometimes the best recourse is to “write-off” the entire loss to experience. Other times it makes sense (when you can afford the resource investment) to pursue all legal options. And some times it may be wise to wait awhile before taking any action.
Each situation is different, so no one can tell you what is “best” for your situation. Seek out sound legal advice; know your options and how long you have to act. Understand the elements of your situation, the issues, and that there are no guarantees that a court will uphold the agreement.
Being “right” isn’t always enough. Live by your principles. Do what is right for you and your business – personally, financially, and emotionally. And remember success is its own reward and can be “sweet justice” all on its own.
Copyright ©2005 Lea A. Strickland, F.O.C.U.S. Resource, Inc.
Updated ©2015 Lea A. Strickland, F.O.C.U.S. Resource, Inc.