Business Contracts: When there is a Breach

Contracts govern nearly every aspect of your small business every day. You are likely to have numerous contracts with other businesses, vendors, contractors, customers, employees, and individuals. A breach of contract, which can be particularly damaging to a small business owner, is common in business. Breaches are typically followed by a host of problems and wasted resources, ending many business relationships. Whether you are a startup business, a well-established business, or need a specialty agreement, a small business attorney will ensure that you are protected before or after a breach has occurred. This post will discuss what constitutes a breach, how it affects your business, and what you can do about it.

When Is It a Breach of Contract?

Contracts can be quite complicated, and what seems like a breach may really be a misunderstanding. One of the most common errors made in contracts is not recognizing breaches or having a process in place for dealing with them. Delays and other unexpected events happen all the time, and breaches can occur when a party fails to perform or pay on time, a product is not delivered as specified, or someone does not uphold the terms of an agreement.

Your small business attorney can help you determine if a breach has occurred and what recourse you have.

Four Types of Breaches

  1. Minor – An example of a minor, or partial, breach is when someone fulfills an agreement, but it is not up to your standards.
  2. Anticipatory – This type of breach gives you the right to bring a lawsuit against the party before the actual breach has occurred. If you paid someone to fulfill a large project by June 1st, but it is May 31st and they have not begun, you may claim an anticipatory breach.
  3. Fundamental – In this type of breach, you may have entered into a lease agreement only to find out that, on moving day, the landlord rented your space to another business.
  4. Material – One of the most serious types of breaches, a material breach of contract is a failure to perform or complete one’s duties under the agreement. If you provide a service or product to someone who then fails to pay you, he or she has committed a material breach.

How Does a Breach Affect Your Small Business?

It is important to assess and respond promptly to a perceived breach of contract. Many breaches, especially material ones, can result in a negative economic impact on your business. If a vendor or supplier fails to deliver a product on time, the damages can be catastrophic. They may even lead to a breach on your part for failure to deliver down the supply chain. If you are a victim of non-payment, this could affect your ability to pay your bills or purchase inventory. A small business attorney will ensure you maintain valid records and represent you in the event that a contract has been broken or resulted in harm to your business.

What Should You Do About a Breach?

You may want to settle a breach as swiftly as possible with little to no interruption to your business operations, but it is paramount that your rights are upheld. In most cases, all parties would prefer to minimize the time and resources invested in a dispute. You might request that the offending party take corrective measures in order to be compliant. You may even collect monetary damages without having to go to court. But when you find there is no other way, there are legal remedies for a breach of contract.

Three Types of Remedies for a Contract Breach

  1. Damages – Payment of damages include compensatory, punitive, nominal, and liquidated damages.
  2. Specific Performance – A court-ordered performance of duty under the contract may be used when damages are inadequate.
  3. Cancellation and Restitution – A contract may be canceled by the non-offending party who may also sue for restitution.

If you need help with your business contracts, contact me, Elizabeth Lewis, at the Law Office of E.C. Lewis, P.C., home of your Denver Business Attorney. Phone: 720-258-6647. Email: elizabeth.lewis@eclewis.com

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