Having a contract in place creates a sense of security and peace of mind. When a business contract is executed, it forms obligations between the two parties. Often, one party is tasked with doing something while the other agrees to pay for this completed task. While having a contract in place does provide protections, this does not mean issues could not come up.
A breach of contract, in essence, is when one party fails to meet the terms of the agreement. In some cases, these can be very minor, resulting in little to no issues when it comes to the purpose of the contract. However, a major breach of contract could cause significant financial damages along with other damages that could impact a business in many ways.
What constitutes a breach?
In order for there to be a breach, three requirements must be met. This includes a valid contract, performance by one party and damages suffered by the performing party. A breach may be claimed if the breaching party failed to perform their obligations on time, failed to perform at all or failed to perform in accordance with the terms of the agreement.
It is important to note that the above conduct does not automictically mean that the non-breaching party was harmed. In other words, for there to be a breach of contract, the breach must be material. A material breach is necessary for the harmed party to have grounds to file a legal action.
Remedies
The resolutions and remedies for a breach of contract are often specific to the contract and type of breach. However, there are common remedies available to those harmed by a breach of contract. This includes damages, specific performance and cancellation and restitution.
In some cases, the contract may specify the damages awarded in the event of a breach. These damages often include compensatory damages, liquidated damages, nominal damages and punitive damages.
Entering a business contract may be a routine business dealing; however, it is also a business interaction or transaction that could be detrimental to your business if a breach occurs. Thus, it is important to be aware of the measures you could take to protect your business and the rights you have when it comes to filing a legal action.