All About Breach Of Contract
If only all businesses carried out the obligations they agree to. If you are waiting for payment, or had a delivery of sub-standard materials, then you know the problem. And even though they signed an agreement, all too often companies breach contracts they have agreed to. This is frustrating, time-consuming and can sometimes even lead to the demise of your business. This article looks at some of the issues involved with breach of contract and what you can do about it.
Delays of the terms agreed upon on the contract, financial problems which may make it impossible to satisfy all terms agreed upon in the contract and unavoidable circumstances will time to time hinder you from following satisfying the requirements of the contract. When this happens, then in the legal world, that is known as a breach of contract.
A contract is an agreement between two parties. It lays down ways in which certain obligations should be fulfilled and ideally should also spell out the consequences if the obligations are not followed to the end. A breach of contract may happen when a given party fails to perform the obligation given to it within the time limit stated within the agreement, if a party performs way below the level stated on the agreement or fails to perform any obligation at all. The legal system categorises a breach of contract into two categories, either as material or immaterial also known as a minor. This is meant to make it easy to determine which form of legal action should be taken in order to find a solution to the breach of contract.
To show the difference of the two categories of breach of contract, let us take two examples. Assume two companies Smith & Company and Acme Suppliers enter into a contract. Smith & Co purchases some of Acme Suppliers to delivered be by the following Monday evening. In case Acme delivers the goods to Smith & Co the following Tuesday morning, there will be a breach of contract. Smith & Co would most likely not be entitled to money damages unless they can show that the late delivery caused some losses or disrupted a production run for example. This breach would be deemed as immaterial and it consequences are not severe.
If the contract, however, stressed the time for the delivery and stated that time would be of great importance, spelling out that it MUST be on Monday, then if the products are delivered after Monday, Smith & Co damages would be presumed and the liability of Acme would be more severe. Smith & Co could be relieved the duty to pay for the goods as agreed on the contract. The consequences will be categorised under material breach of contract.
The breach of contract case does not necessarily have to go to court and this is only the last resort in case these other avenues fail. There are four other ways of resolving out of court.
After a breach of contract happens one or both of the parties may look for ways to ensure that the terms of the contract are enforced or any financial damages caused by the breach are compensated.
The second option is to contact your dispute resolution lawyer to have them seek damages from the other party. If the parties cannot resolve this case on their own, they may decide to call in a mediator to review the contract dispute. Finally, they may agree to have a binding arbitration of a contract dispute.
If these out of court methods fail, you will have to file for proceedings for civil litigation in court. This is one of the most used methods when there is always a breach of contract. In case the amount of damages sought is below a certain level of money, then the parties are given the chance to use a small claims court to resolve their case. For larger figures, then the case would go to the District Court.