Are you worried that you might have a breach in contract on your hands?
Unfortunately, even the most scrupulous of business owners can sometimes face problems when it comes to contracts.
Here’s a discussion of what constitutes a breach in contract, as well as some examples of breaches that are much more common than you might expect.
What constitutes a breach in contract?
A professional business lawyer can draw up a legally binding contract. When you have one, it means that all parties involved are legally obligated to follow the rules and if any time they don’t, this constitutes a breach in contract.
Any time there is a breach in contract, the other partner theoretically has the right to sue so long as there is proof that the contract is a breach, as well as proof of loss.
Sometimes a breach in contract is relatively minor, and at other times it may constitute a major crime like fraud or embezzlement. If the terms of a contract are not met, big or small, there is a chance there is a breach.
It usually has to do with a failure to:
- Deliver services as promised
- Perform a job
- Interfering with someone’s ability to meet obligations
- Deliver goods as promised
- Complete a job
- Pay a party within a certain time frame
If one or more terms are breached, and legitimate damages result tied to that breach, the other partner technically has grounds to sue.
When you are going into business with one or more partners, be clear about all terms of all of your agreements. This includes non-disclosure, intellectual property, and partnership agreements.
What happens if there is a breach in contract?
Even if a business partner faces a lawsuit, these cases can usually be settled out of court.
The results of a breach in contract aren’t necessarily dire, and often parties will be able to settle out of court. However, if a breach can be proven, the person who breached the contract will be subject to appropriate legal steps and punishments.
Remedies besides court include restitution, reformation, paying damages, and complete termination of the contract.
Can you prevent a breach in contract?
There is no way that you can be 100% certain a contract will not be breached. But here are some things you can do to help reduce the risk, which is super important for startups
Here are a few examples:
- Hire a reputable business lawyer before you launch your business
- Draft appropriate agreements
- Review contracts regularly
- Monitor and manage contract performance
- Make a plan to monitor contracts and watch for warning signs
- Have clearly defined metrics to help ensure compliance
Detailing your contracts will help you to protect yourself. Make sure contracts are in writing as early as possible in your business.
Oral contracts may also be honored; however, they are difficult to prove, and so you have far less protection if you don’t have things in writing.
Breach in Contract: Types and Examples
A breach in contract may take different forms — here are a few examples of the most common types of breaches.
Anticipatory Breach / Repudiation
With a repudiation, a party renounces its contractual obligations.
In an anticipatory breach, one party will usually notify the other party that they cannot fulfill the necessary obligations. Though this doesn’t happen as often as the other types of breaches in contract, it still is sometimes enough for the other party to sue.
Suppose there is a deadline for a building project tied to the launch of a business, for instance, and the company in charge of the building decides to cease or even suspend the project via a repudiation notice. In that case, the other party may have legal grounds to pursue them for damages.
Material Breach
With a material breach, there is typically a major contract term with a material breach that has not been provided or fulfilled.
Some contracts will detail what constitutes a material breach.
This can be the case when goods and services are not provided at all or within a specified length of time per the contract.
These are probably the most major and most common of all types of breaches.
This might also be called an “actual” breach.
A Minor Breach in Contract
A minor breach or partial breach is usually the result of some small term being missed or neglected. This typically does not amount to enough damages to sue; however, the party who has done the breach is still responsible and may face the consequences.
Get Legal Help Today
Our legal professionals help you to reduce and mitigate risk in your business. We can help you build your business from the ground up and create a solid foundation to act as a buffer from future legal problems.
We help small, medium, and prominent local and online businesses navigate through legal problems.
Call toll-free 855-976-3783 today or book a consultation online.
If you liked this article, here are three more that might help:
- Hiring a Business Lawyer for Passing on the Family Business
- Important Legal Structures for Your Startup
- Legal Advice For Startups That Are Recruiting And Hiring Employees
