Signing a contract isn’t meant to be a business gamble. Both parties commit to contractual obligations to mitigate risks on both sides. A contract typically recognizes unexpected events impacting a party’s ability to perform.
However, if the other party fails to live up to the terms of the agreement, you may need to pursue legal action to protect your business.
When is a contract breached?
The failure to fulfill obligations outlined in a contract without a legal excuse constitutes a breach. This occurs when one or more parties:
- Fail to meet the contract’s requirements
- Hinder the other party from performing
- Declare their intent not to abide by the contract
The breaching party may deny the claim to avoid liability, protect their reputation or gain an advantage. It could even be due to an honest misunderstanding. Regardless of the reason, you may have to resort to litigation if negotiations to resolve the dispute fail.
Remedies you can pursue
Legal consequences of a breach of contract can take the form of:
- Damages: The breaching party must pay for direct and consequential losses. If the breach was malicious, punitive damages could also be added.
- Specific performance: If monetary compensation isn’t enough, the court can order the breaching party to perform the work. Plaintiffs typically seek this in cases involving specific goods or services.
- Cancellation or rewrite of contract: If the agreement is no longer enforceable or beneficial, the non-breaching party can release both parties from obligations.
Some circumstances make it trickier to pursue remedies. A business filing for bankruptcy or a buyout may make it difficult or impossible to honor the contract. Consulting an experienced business and commercial litigation attorney can help you explore breach of contract claim options.
Preventing contract disputes can also be an effective strategy for protecting your business. You can safeguard your contracts in several ways, such as using precise clauses and building trust-based business relationships. A mutually beneficial contract is an excellent place to start, as it fosters a commitment to uphold its terms.
