You have been waiting for months for a vendor to deliver on a project, but they are long overdue. With so much time wasted and no sign of actual progress, you are beginning to seriously consider a lawsuit. But what will this actually accomplish? Lawsuits are daunting for a reason: They represent a considerable investment of time and money into an outcome that is far from guaranteed. What are some alternatives to legal action? How could you have prevented this from occurring in the first place? If you need help constructing effective contract remedies, consider contacting an experienced technology lawyer today.

Carefully Weigh the Pros and Cons of Litigation Before Filing a Lawsuit

A delayed project can be a real source of frustration. Even if a project is delivered on time, it may be too substandard to be of any use. Legal action might seem tempting in this scenario, but is it really the correct business move? Are you willing to dedicate senior resources to testifying in a law suit; can your business afford to have them pulled away during the litigation? If the other party understands that discomfort and disruption, will they delay, postpone and reschedule to compound that issue?

To answer this question, you will have to carefully consider the pros and cons of suing the vendor. First, consider your damages. How much money did you lose because of the delay or substandard deliverables? Did you lose thousands? Hundreds of thousands? Millions? If the number is relatively low, legal action might not be worth the effort. After all, does it really make sense to pay high legal fees just to recover a small amount of compensation from the vendor months or even years down the road? Can you afford that distraction? Maybe it’s better to consider what you could do/should do to avoid that situation. There is an old saying You don’t plan to fail, but you just fail to plan. Let’s consider then for a moment how you can properly plan:

What are Contract Remedies in the Tech World?

Contract remedies are strategies to help resolve various issues in the tech world, including late projects or substandard deliverables. Understaffed projects, underqualified staff assigned to that project, removal of key technical resources from the project team in the middle of the project. Contract remedies explore the specific issues and help craft appropriate remedies in the project (generally in the SOW) before the dispute even occurs. The most effective contract remedies are highly personalized to the individual project, giving aggrieved parties options that actually make sense based on their unique circumstances. Historically many purchasing teams have focused on, decreased payment obligations for a late delivery. If a vendor delivers a project one week late, they might lose 5% of the agreed-upon payment, or you could break this down to a daily rate. I think there are better contract remedies that look to address the deficiency directly, like expanding the project team earlier in the project to avoid the delays, maybe use of certain tools or resources; however that sort of remedy would always rely upon systematic ongoing project status reporting.

The other problem with adding late fees is basic business, when you have a delivery delay, your vendor also has a delayed delivery. Their costs just keep ticking away like a taxi cab, and the vendor then devotes less resources and/or more junior resources to your project because the project can quickly become a looser for the vendor as well. Service delivery projects are either win-win when done properly or lose when they fail. You will have a hard time threatening a failing vendor into correcting a project with litigation, they typically will start explaining things you failed to disclose, changes in scope, absence of cooperation etc. as the basis for the failure.

In addition, a discount might not be as important as the actual finished project. If the finished project is vital to the success of the client’s company, there is no option to simply withhold payment and walk away. In this situation, remedies may need to become more imaginative. Again, it might be incredibly tempting to sue in this scenario.

When your back is against the wall, and you desperately need the project completed, you may feel as though a lawsuit is your only remaining option. While it is true that a court could compel the vendor to complete the project with a “specific performance” order, this may take too long. In addition, there is never any guarantee that such a lawsuit will be successful.

In this situation, it makes sense to forget about the contract and approach the vendor like a human being. How can you convince them to finish the project? What kinds of consequences can you legally threaten them with in order to compel them to fulfill their end of the bargain? Better yet, maybe you should consider all this when you are developing your Statement of Work and your Project Plan. Don’t assume everything will just go smoothly or important details can simply be added later in the project (that rarely happens). The better job you do up front developing the SOW; defining a delivery process that includes status reporting requiring a jointly attended weekly project status meeting with documented minutes, goes a LONG WAY to avoiding a failed project, and/or quickly and effectively remediating project delivery complications. But there is no short cut, an onerous contract is just kidding yourself, you need to make sure your vendor is successful, in order for your project to be successful.

If you do still encounter a project delivery issue, this conversation should involve senior executive sponsors from both organizations; not the project teams. The leader of the aggrieved party may choose to explain to the leader of the vendor’s organization how important this project is. Appeal to their human nature. A structured mediation process may help, but unless mediation clauses are included in the contract, the other party may be under no obligation to participate.

If the vendor is not convinced by this “humane” approach, consider the types of consequences you can enforce. Perhaps the company provides other services to your company. Threaten to cancel these additional contracts and relationships if the project is not completed.

If the vendor has relationships with other companies within your general sphere of influence, consider threatening to tell these organizations about your experiences. Keep your descriptions as factual as possible to avoid potential defamation allegations. Businesses generally rely heavily on their reputations, and the tech world is full of tight networks. If you execute this ultimatum effectively, it may be enough to spur the vendor into action.

How Do I Stop This From Happening in the First Place?

The ideal way to address uncompleted projects is to prevent them from occurring in the first place. You can accomplish this goal with effective contract remedies and a few simple steps before working with new vendors. Perhaps most obviously, you should research a potential vendor before assigning them a project. You also need to completely understand your environment, ensure that you have the materials and the resources to timely meet your obligations and make sure the project is a priority for staff assigned to the project. If you don’t do all of these things, its unlikely that the vendor can protect you from yourself. Carefully outline the project delivery process, see where additional resources could help ensure and stipulate in the SOW that in the event of a delay.

As previously noted, networking is important in the tech industry. Ask around and determine whether any of your trusted connections have worked with the vendor before. If you hear mixed responses and hints of dissatisfaction, you might want to consider a different vendor. You would be VERY well advised to ask a vendor not just for a reference but also to review the associated project notebook for that project. The less you do, the less you get; if your project is important take the time to plan, follow your plan, and make it successful.

If you believe you have a reliable vendor, you should try to include effective remedies and safeguards in your contract to prevent these issues (that requires time and effort). Practical remedies for delays may involve extremely punishing financial consequences for even a single day of lateness.

Contact John P. O’Brien to Learn More About Contract Remedies

At the end of the day, winning a lawsuit could still mean losing the entire project. Although it might be tempting to score points in court, a savvy entrepreneur always considers the “bigger picture.” Alternatives to legal action are almost always possible, as both parties generally want to avoid the stress, time, and expense of litigation at all costs. You can also view this as a learning experience and take steps in the future to prevent this from ever happening again. Need help constructing effective contract remedies? Contact John P. O’Brien, Technology Lawyer, today at (732)-219-6641.