What happens when another company breaches a business contract? | Hines & Maxwell, PLLC
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What happens when another company breaches a business contract?

Running a company in any industry can be an exhausting but rewarding job. You have to make critical decisions every day that affect not only the health of your company but your income and the security of your employees. Most business owners understand the importance of committing to major transactions and agreements in writing.

Doing so helps protect you by ensuring there is no failure of communication. Misunderstandings can result in major delays or setbacks for your business. Ensuring that you and the other party involved in the contract fully understand the expectations and needs of one another can reduce the risk of such issues. Sadly, sometimes, people simply don't follow through with their contractual obligations. When that happens, you may have to take steps to enforce your contract or mitigate your related losses.

What exactly is a breach of contract?

Some people feel confused about the definition of breach of contract, as it is a legal term. In the most basic sense, a breach of contract is the failure of either party to complete their obligations as outlined in a valid contract. For example, failing to pay the balance owed for a delivery or work performed at the time of project completion would be a breach of contract. Not completing the work, or making the delivery of goods or supplies as ordered, is also a breach of contract.

People can breach a contract in whole or in part. Making a delivery, but only delivering a portion of the agreed-upon items or delivering at a severely delayed date may be a partial breach, while failing to make the delivery would be a complete breach of contract. Either issue can cause headaches for the other business involved.

What can you do when dealing with a breach of contract?

Sometimes, people simply make mistakes. Everyone, from the executive who signed the contract to the worker loading the delivery truck, could end up miscounting or forgetting about one part of what was required. In these situations, simply contacting the offending party could ensure timely resolution of the issue. Reminding the other party involved in the contract of the obligations they have to your company may be enough to resolve the issue.

Other times, however, the breach of contract is intentional. Perhaps the person never intended to pay or chose not to uphold his or her end of the agreement. In this situation, legal action is often required. You may need to file a lawsuit to ask that the courts enforce the contract as executed. In some situations, you may also be able to seek damages related to the breach of contract, such as lost sales, wages paid to workers who could not perform a job due to non-delivery or other provable losses related to the breach.

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