Unfortunately, business operations do not always go smoothly and conflicts with other commercial ventures will inevitably arise. Relationships between businesses are inevitably necessary and sometimes they go south. A disputed business contract can be very expensive if it ends up in court, even impacting the bottom line.
Any business venture needs to develop strong working relationships with other businesses to arrange for needed services, supplies, equipment and real estate, for example. Retaining smart and experienced legal counsel early on to assist with business-to-business contract drafting and negotiation is essential to see that the contract terms are in your interest and to minimize the possibility of conflict later, especially pricey civil litigation.
The Williamsburg Pottery Example
The confidential settlement of a major Virginia business-to-business contract dispute was announced in January 2013 between Williamsburg builder and developer Henderson, Inc., and famed Virginia retailer Williamsburg Pottery. This contract dispute illustrates the kinds of legal issues that can arise between businesses.
The late Jimmy Maloney started Williamsburg Pottery — referred to locally as "the Pottery" — in 1938 to sell pottery fashioned from locally harvested clay and finished in an old, traditional manner. The Pottery became a tourist destination with expanded offerings where shoppers could browse for bargains in a rustic, informal setting.
The Pottery began a multimillion-dollar renovation and expansion in 2010 that transformed it into a modern, upscale shopping experience, reopening in April 2012. The Pottery had chosen Henderson as its building contractor, reportedly accepting a $16.5 million bid.
News reports indicate that Henderson eventually sued Williamsburg Pottery and its vice president in Virginia Commonwealth Court for $3.5 million in damages for breach of contract and business torts, including claims for breach of the implied covenant of good faith and fair dealing, fraud and fraudulent inducement. The plaintiff also requested interest, costs and attorneys fees from the defendants.
According to the Williamsburg Yorktown Daily, Henderson alleged in the lawsuit that the Pottery's vice president agreed verbally to pay for the cost of extra construction beyond what was agreed to in the initial agreement, plus a fee, but that the extra money was never paid. Reportedly, the executive refused to sign a new written contract to memorialize his verbal promises to pay.
While the parties were able to settle their dispute, they each undoubtedly incurred major expenses associated with the settlement negotiations, to say nothing of the lost time and energy that could have gone into their respective business ventures.
In your business practices, be sure to retain a knowledgeable contract attorney early on to help you develop good commercial agreements that are unlikely to end up in court, and to assist you with negotiation and modification later, if necessary to protect your interests.