Answers to Your Questions About Breach of Contract
Contractual agreements are a key part of every business operation. They help you produce goods, buy supplies, transport things, and even have a physical site to do business. But what happens when a party fails to uphold a contract with you? Here are some answers to your pressing questions and what to do next.
What Types of Breach of Contract Exist?
Breach of contract is a fairly broad area of civil law, but it boils down to four categories of breaches. The first two are based on what part of the contract was not fulfilled. Minor breaches are those in which the majority of the contract was fulfilled, but some aspect of that fulfillment didn't meet the terms. For instance, you ordered 1,000 blue widgets but the supplier sent 1,000 green ones instead.
Material breaches, on the other hand, affect the benefit of the contracted agreement as a whole. If you ordered 1,000 widgets but the supplier only sent you 500, this is a serious failure which will cost you money. The elements breached are material to the purpose of the contract.
The other two types of contract breaches depend on when the breach occurs. Once a breach has happened—after you receive only 500 widgets and the deadline has passed—it is termed an actual breach. Some contract breaches, though, are clear before the contract ends. If the supplier informs you they have stopped production on widgets and won't send the other 500, the breach is anticipatory.
Can You Negotiate a Settlement?
Many civil legal matters are actually hammered out though negotiations and settlements outside of court. Because lawsuits and trials are a financial investment, smaller issues—often involving minor breaches—can and should be negotiated between the two parties. Alternative dispute resolution such as mediation can help both come to a workable compromise. You may negotiate even after a lawsuit has begun.
What Can You Get From a Court?
If negotiations fail, you may need to pursue a lawsuit for breach of contract. But what remedies can you receive from a judge? In general, there are three types of remedy you may ask the court to provide.
The first is financial damages. In contract law, damages are generally designed to compensate the innocent party for what they lost as a result of the breach. This may range from just the amount of the contract up to damages for its lingering economic effects. Punitive damages are less common.
You may also ask the judge to order the other party to fulfill their end of the deal. This is known as specific performance. This remedy is, of course, only valuable if the other party has the ability to fulfill it. For example, if the widget company does have 500 widgets in reserve but wants to sell them to someone else, you can still get what you need from a court order.
Finally, there is cancellation and restitution of the contract. This is essentially a reset to the position you were in just before entering the contract. The judge might order your widget contract canceled and any payment you made returned to you. You may then use that money to go buy different widgets. This is particularly useful in anticipatory breaches when time is of the essence.
As with many aspects of business, contract law is complicated. How should you approach a breach of contract you face? Find out by meeting with The Law Office of W. Randall Holcomb, PLLC. We offer a range of services to help North Carolina businesses with all their legal needs. Call today to make an appointment or get more answers to your questions.
