Wouldn’t it be ideal if every party to a contract or transaction always fully completed their obligations pursuant to the contract?  Sadly, there are often many actions or factors that can take place during the course of a contractual relationship that can undermine the contract and its terms.  Delays in performance, financial hardship for one party, and unexpected costs during performance of the contract are common and often complicate or prevent a party’s performance of the contractual obligations.

What is a “contract?” How is it breached?

A contract is an agreement between multiple parties drafted for the purpose of providing goods and services in exchange for payment or other goods and services.  The terms of the contract define the specific duties and obligations each party is to undertake and complete.  The parties’ signing of a physical contract provides legal enforceability and basis for legal action if one of the parties fails to perform their duties and obligations under the contract.

Breach of a contract takes place where a party fails to fulfill its duties and/or obligations under the terms of the contract.  Breach can take place where a party fails to perform within a specified amount of time, provides performance that is not in accordance with the language of the contract, or if the party fails to perform at all.

An example to better understand…

Picture a contract formed by two companies – XYZ Brands and ABC Shop.  XYZ Brands contracted with ABC Shop for the purchase of 50 widgets produced by ABC.  Pursuant to the contract, ABC Shop is to deliver the widgets to XYZ Brands by Monday evening.  However, ABC Shop does not deliver the widgets until Tuesday evening.

What Happens Next?

In this scenario, XYZ Brands seeks to take legal action against ABC Shop for failure to perform (breach) pursuant to the terms of the contract.

What are the consequences of breach?

Applicable consequences for breach depend on various factors, such as the how the contract was breached, whether or not the non-breaching party suffered damage as a result of the breach, and, if the non-breaching party suffered monetary damage or loss, the specific amount of monetary loss.  It is best to seek legal help if you discover that a contract you are a party to has been breached.

What are the possible solutions?

The remedies available in lieu of a breach of contract depend on the nature of the breach and the terms and language within the contract.  Common monetary remedies for different types of damage include:

  • Compensatory Damages – The most common damages; compensatory damages look to make the non-breaching party “whole” by requiring the breaching party to perform its duties or obligations pursuant to the contract, as agreed.
  • Consequential and Incidental Damages – These damages will be awarded to the aggrieved parties if both the parties involved in the contract knew about the potential losses.
  • Liquidated Damages – Liquidated damages are specified within the language of the contract. For example, the contract may include a clause stating: “ABC Shop shall provide monetary payment in the amount of $15,000.00 if ABC Shop fails to deliver XYZ Brands’ order on time.”

What are the possible solutions?

The remedies available in lieu of a breach of contract depend on the nature of the breach and the terms and language within the contract.  Common monetary remedies for different types of damage include:

  • Compensatory Damages – The most common damages; compensatory damages look to make the non-breaching party “whole” by requiring the breaching party to perform its duties or obligations pursuant to the contract, as agreed.
  • Consequential and Incidental Damages – These damages will be awarded to the aggrieved parties if both the parties involved in the contract knew about the potential losses.
  • Liquidated Damages – Liquidated damages are specified within the language of the contract. For example, the contract may include a clause stating: “ABC Shop shall provide monetary payment in the amount of $15,000.00 if ABC Shop fails to deliver XYZ Brands’ order on time.”

Seek Legal Representation

You should always seek representation from an experienced attorney prior to signing a contract. Counsel will examine the language of the contract and assure that all language and terms are proper, and explain the terms, conditions, and consequences of breach in proper detail to you.

If you or someone in your life has been harmed as a result of a breach of contract contact our office today to speak with one of our experienced contract attorneys today! Schedule an appointment with our team!