What You Should Know about Breach of Contract as a Business Owner

Your business is hired to perform a job for a client. You respect your part of the deal, you do the job, but the check does not come. The client broke the agreement you had, and your business might be financially strongly affected. Dealing with clients or suppliers who do not keep their promises is something that occurs too often to businesses.

Protect your business and learn the essentials on breach of contract.

Evaluate the type of breach of contract

A breach of contract wastes your money and time and certainly leads to frustration and maybe serious damages for your business. Before you start filing a lawsuit, check which of the following situations you are in:

  • A material breach: let’s say you order a website for your business and the web designer delivers you something significantly different from what was specified in your contract. In this case, you have the right to remedies for the material breach.
  • A minor breach: taking the website case, in the situation of a partial breach, the web designer delivers the website, but with a delay. The breach might be considered minor unless you put in your contract that “time is of the essence” and show how much profit you lose from not having the website ready. Otherwise, small delays are considered minor breaches.
  • Anticipatory and actual breaches: if the web designer announces you, in advance of the deadline you agreed upon, that he/she intends not to deliver the promised work, then you are in the situation of the anticipatory breach. If the web designer refuses to deliver the website on the due date or at a later date, or he/she delivers the website incompletely, then you are in the situation of an actual breach of contract. Even if the contract breach is announced in good faith, it is still bad news for you and can hit your business.

What to do in a breach of contract situation

There are many remedies or damages available to you, which come as monetary rewards intended to make up for any loss you had because of a contract breach situation. Talk with a lawyer to advise you on the damages you could collect, such as:

  • Expectation damages: for instance, you could get from the web designer the market value of your website. In other words, you can ask for damages that cover what you intended to get out of that specific contract.
  • Consequential damages or indirect damages: if your website also hosts an online shop for your business, and you lose profit for a week because of the delivery of the the website was delayed, you are entitled to consequential damages.
  • Liquidated damages: if the breach of contract situations are well defined in the agreement, you can collect the agreed damages specified in there.

Before starting a lawsuit

  • Review the contract to see what breach of contract situations was built into the contract and act accordingly;
  • Inform the other party, officially, that there has been a breach of contract;
  • Keep all the communication and documentation related to the contract.

Get our help today to review the contract, draft the communication with the other party and file a lawsuit, if it is needed.

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August 6, 2021

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July 18, 2020

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