What happens with a breach of contract?
Enforceable Contracts Protect You
Mark Twain said:
I have signed a lot of contracts in my time and at some time, I probably knew what the contracts meant, but six months later everything had grown dim …. From one person to the next, perceptions and memories differ. A good contract gets all parties on the same page to start and is an effective means of holding all parties to their promises.
Well-crafted contracts are essential for personal and business matters. They help you avoid miscommunication and misunderstandings by defining terms, setting standards, assigning areas of responsibility and providing remedies. A good contract will provide you with sound legal footing if you are faced with a breach of contract. There are many considerations that go into writing a solid contract, but let’s discuss what happens when there is a breach of contract.
Resolving Breach of Contract Disputes
So you have communicated with the person on the other side of the contract and they either do not respond or refuse to follow the terms. Or maybe they now have an interpretation of the contract that does not fit your original understanding. What do you do?
First, review what makes up the contract. You should have a writing clearly identified as a contract and with clearly identified parties. Ask a legal professional to review the contract with you to make sure you understand how the different provisions of the contract affect one and other, and whether circumstances impact an otherwise logical interpretation.
If we review your contract and confirm you met your obligations but the other party has not, we often take the first step of sending a letter of explanation to the other party. That letter can point out the potential consequences if they fail to honor the contract. Sometimes, a well-drafted letter can bring a party in breach to a more reasonable point of view.
If the nonperforming party does not respond to a reminder of what they agreed to do, next steps could include:
- Filing a lawsuit
- Arbitration, or
Check your contract to see if you already committed to one of these steps in the event of a dispute. In arbitration, you have one or more arbitrators, who act somewhat like judges, in that they hear both positions and the evidence each side has gathered so far, weigh each side’s position, and make a determination, all with less formality and quicker than a lawsuit. In mediation, the two parties and their attorneys work with a mediator to find a workable compromise. Both options are usually less expensive than litigation.
If one party ends up filing a lawsuit, the other party gets a chance to answer. Both parties present the judge with their evidence and interpretation, and the court then makes a binding decision on whether there was a breach of contract and the remedy for the breach.
Resolutions to Breach of Contract Disputes
An individual or company which has breached a contract may be found liable for compensatory damages and other damages including:
- Punitive damages
- Nominal damages
- Liquidated damages
- Specific performance
- Contract cancellation
Both parties will typically incur court costs and attorney fees and spend time (that could have been spent conducting other business) in the preparing the case and presenting it to the judge or jury.
Avoid the Lawsuit – A Contract Attorney Is a Great Investment
Yes, we litigate breach of contract disputes. But so often we think, “This entire fiasco could have been avoided by a good legal contract in the first place.” We strongly advise using an attorney any time you are creating or signing a contract that is long term, involves valuable property including intellectual property or you have other important items at risk. We want to see you succeed by being smart about your risk taking and we will work within your budget.