A breach of contract occurs when one party fails to fulfill their obligations outlined in a legally binding agreement. Whether you’re dealing with a business partner, supplier, or client, understanding how to approach these claims is essential.
Types of breach of contract
There are different types of breaches to be aware of in business dealings. The most common are:
- Material breach: This occurs when the violation is so significant that it undermines the entire contract, often allowing the other party to terminate the agreement.
- Minor breach: Here, the contract is technically violated, but the breach doesn’t substantially affect the agreement’s core purpose, meaning the contract can still stand, though the injured party may be entitled to damages.
- Anticipatory breach: This happens when one party indicates they will not fulfill their obligations before the due date, allowing the other party to take legal action sooner.
Recognizing these breaches is the first step in determining how to proceed with resolving the issue.
Steps to take when a breach occurs
When a breach happens, it’s crucial to assess the situation carefully. The first step is to review the contract to understand the terms and obligations clearly. You should also check whether the breach is material or minor. If it’s a minor breach, you might want to consider resolving the issue through negotiation or mediation before pursuing legal action.
If the breach is significant or the other party refuses to remedy the situation, you may need to take formal steps. This could involve sending a formal demand letter or filing a lawsuit. In some cases, arbitration or mediation may be required if stipulated in the contract.
Legal remedies for breach of contract
If you are the party affected by a breach, you have several options to seek remedies:
- Compensatory damages: This is the most common remedy, aiming to restore the injured party to the position they would have been in had the contract been honored.
- Consequential damages: These damages cover losses that occur as a result of the breach but are not directly caused by it.
- Specific performance: In some cases, the court might order the breaching party to fulfill their contractual obligations rather than awarding monetary compensation.
Knowing these remedies can help you understand what you can pursue in a breach of contract situation.
Breach of contract claims can be costly and time-consuming, but knowing your options can help protect your business and its interests.