Understanding Breach of Contract

While a business may have internal disputes among its partners, LLC members or shareholders, there can also be disputes between businesses. A supplier of goods or services may damage a business by failing to provide the contracted goods or services. That same business may fail to pay the supplier. In either case, if the terms of a signed agreement are breached, legal action may follow.

Establishing Breach of Contract between Businesses

Establishing a breach of contract claim requires an analysis of the plain language of the agreement at issue and whether the agreement has been followed. For example, if one party has failed to perform a contracted service within a specified timeframe, this may constitute a breach of contract. Other examples include, but are not limited to, the failure to pay as agreed, or the failure of a party to provide the goods specified in the contract.

All obligations set forth in the contract must be fulfilled to complete performance of the contract. If any provision is not complied with, this may constitute a breach of contract. To successfully sue for breach of contract, a business must address several issues, including:

• Whether the adverse party breached any terms of the contract.

• Notice must be provided to the breaching party explaining how that party breached the contract.

• Whether the breach of contract is defined as a material breach (meaning significant), or whether there must be strict compliance with the contract terms.

In addition, without essential components such as an offer by one party, acceptance by the other and consideration paid (some value paid), the written agreement may not be valid.

Outcomes of Breach of Contract Disputes

If a case is pursued in court and not resolved, there are many outcomes that can occur depending on the nature of the contract. These outcomes include, but are not limited to:

• Compensatory (or punitive) damages are awarded (punitive damages are rarely awarded).

• The defendant is required to complete the terms of the contract (an example may involve the sale or purchase of real estate because real estate is considered unique).

• The court cancels the contract and places the non-breaching party in the same position had the contract never been entered into (this involves refunding funds paid by the non-breaching party).

In the world of business to business disputes, it is important to have an experienced business law attorney in your corner to fully evaluate your case. Call and make an appointment today.