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What happens after a breach of a business contract?

On Behalf of | Jun 24, 2024 | Uncategorized

Business contracts exist, in no small part, to clarify agreements. Both parties signing a contract generally set terms that they feel are important. Business contracts may outline the expectations in an employment arrangement. They could lock in prices and delivery dates with vendors.

Contracts are necessary for many different types of companies, and usually everyone who signs a contract does their best to uphold the agreement. However, contract breaches do occur. Sometimes a client who signed a contract with a payment arrangement defaults on their financial obligations. Other times, a vendor or might not deliver supplies, leaving a company without necessary materials.

What can a business do after a breach of contract occurs?

Communication between parties is necessary

Sometimes, what looks like a major breach of contract might actually just be an oversight or the result of confusion. The party seemingly in violation of the contract may not have violated the agreement intentionally. Many contract breaches are unintentional. The other party might quickly resolve the matter after realizing the mistake they made. Beginning with informal communication to check in with the other party and then following up with more formal communication efforts could help resolve disagreements related to business contracts.

Contract review may need to occur as well

Perhaps the other party claims that they are not in breach of the contract and references the terms included in the original agreement. Maybe they agree that they have made a mistake but refuse to acknowledge a penalty clause that might impose certain fees on them for their mistake or oversight. Going over the contract carefully with a skilled legal team can help an organization confirm that a breach did occur and what financial consequences there might be for the breach. Beyond that, a review of the contract could help one party determine if they can invalidate the contract because of the breach or if the agreement requires alternative dispute resolution before attempting to litigate.

Taking the matter to court is sometimes necessary

If the party that violated the contract does not voluntarily address the issue, it may be necessary to ask the civil courts for help. Judges can potentially enforce valid contracts after a significant breach of contract. They have the authority to terminate the contract or enforce the penalties included in the original document. They also have the authority to award the plaintiff damages for lost revenue and other direct consequences of the contract breach. They can even order specific performance, which could lead to the other party finally following through on their contractual obligations.

Sometimes, filing a lawsuit could be enough to read to settlement negotiations. Other times, the party in breach of the contract refuses to compromise, making an actual hearing in front of a judge necessary. Taking every reasonable step to enforce a consequential contract is crucial for the protection of modern organizations. Owners and executives who understand how to respond to contract breaches can take appropriate action when the actions or omissions of another party causes a company meaningful setbacks.