Breach of Contract? Here are 3 Things Small Businesses Need to Know

Men signing contract

Small businesses should expect to encounter a breach of contract every once in a while. When the other party involved fails to fulfill their obligation as stipulated in the agreement, the contract is broken, and losses can occur. This can be frustrating to every business owner, and deciding on a course of action is often difficult when it’s your first time dealing with this kind of problem.

The best thing you can do is first understand the many elements that characterize the conflict and determine the legal actions you can take. After a while of badgering the other party to no success, it’s worth knowing which pursuits will benefit your company the most.

Identifying the Specific Contract Breach

Contracts can be breached in various ways, and understanding the category you fall into is the first step forward. There are criteria that the incident needs to meet to qualify for a lawsuit.

The failure to perform one’s obligations according to the contract is called a material breach. This is the most serious kind of breach and warrants you to seek compensation for damages in court. When you’re forced to stop the contract’s enforcement because the other party did not deliver the goods or services as they promised, it’s considered a fundamental breach.

The third kind is the anticipatory breach, which applies when you stop the contract because you anticipate the non-fulfillment of the other party within the agreed time frame. The last is called the minor breach. This means the job is considered partially done, which could be the case for websites with errors and similar inconveniences.

If these errors were fixed, there should be a problem. Otherwise, it could qualify as a minor breach. For a better understanding of where your incident fits, go ahead and look up “small business lawyer near me.” Proper legal consultation should make these easier to understand.

Proving the Breach

Just because you feel a breach of contract happened doesn’t mean the court will immediately take your word for it. Providing evidence is essential in establishing a credible case. The most basic requirements you’ll have to meet include the contract itself, which should be signed by both parties and notarized to prove its authenticity. There should also be documentation to prove that the contract was broken and that damages were incurred, such as financial loss. Lastly, it has to be established that the party you’re accusing is truly responsible for the damages.

Attorney and client shaking hands

Pursuing a Remedy

Depending on the type of breach that happened, there are specific remedies you can pursue. Often, these cases aim to recover financial losses incurred due to the breach.

When you want the offending party to compensate you monetarily, it’s called compensatory damages. Consequential and incidental damages apply if the offending party was fully aware of the losses you’ll suffer if they don’t honor the contract. Liquidated damages are the damages included in the contract in case of a breach, which may include attorney’s fees. If the case in itself isn’t that grave, sticking to remedies that cover the costs incurred will save you from unnecessary stress.

Dealing with Breaches Better

The better you understand the factors that come into play with breach of contract cases, the better you can handle it in the future. One of the best ways to safeguard your company is to allow a lawyer to draft your contracts to ensure that you’re legally protected. Coordinate with the offending party as best as you can, and when they fail to comply, you now know where to begin in pursuing a remedy.

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