What Happens If the Company You Signed a Contract With Runs Out of Money?

Talking a big game is an important business skill.  Plenty of business contracts begin when one party makes outsized promises to get the other party’s attention.  In a business contract, though, you are legally obligated to keep the promises that you make.  This is why projections become noticeably more modest once you get to the negotiating table.  This is also why many business deals fall through before they get to the contract signing stage, as one party realizes that the other does not have as much cash or as much access to credit as it originally claimed, and therefore their combined finances are not enough to complete the project that they had in mind.  When both parties enter into a contract in good faith, having been transparent with each other, there is a good chance of success, but unexpected financial setbacks can still occur.  If you have signed a contract with a company that ran out of funds before it was able to fulfill all of its contractual obligations, contact a Los Angeles business litigation lawyer.

Is It Time for a Breach of Contract Lawsuit, or Just a Little Bit of Patience and Understanding?

Business contracts offer you protection if the party with which you signed a contract does not pay its fair share for the project you are doing or if the other party walks away when the work you agreed to do together remains unfinished.  They also protect you if the other party harms your company or undermines it by engaging in activities that the other party promised to avoid by signing the contract.  For example, when your company works closely with another company, it might find out trade secrets and other confidential information that you do not want shared outside of your organization, so the contract might include non-disclosure provisions.

When payment is the provision that the other party cannot fulfill, you should not rush to the courthouse at the first sign of trouble.  Cash flow is unpredictable, even for big businesses.  Negotiate before you sue the other party for breach of contract.  Especially if the breaching party proposes an alternative solution, this may be a better, practical business cost/benefit option.  To give just one recent example, a real estate developer in Los Angeles recently defaulted on a loan worth tens of millions of dollars, presumably because the loan originated when interest rates were low, and the borrower was no longer able to keep up with the payments once the interest rates increased.  The parties discussed foreclosure, but in the end, they were able to work out another agreement.  If the parties are transparent with each other about their problems meeting contractual obligations as soon as they appear, , it is often possible to avoid litigation.

Speak With a Los Angeles Business Litigation Lawyer

A Los Angeles business litigation lawyer can help you work out your differences with the other party before you have to face each other in court.  Contact Litigation, P.C. in Los Angeles, California to discuss your situation or call (424)284-2401.

Source:

therealdeal.com/la/2023/08/30/zach-vella-defaults-on-79m-loan-for-south-bay-portfolio/