Let’s say you’re hired on contract to perform a job for a customer. You do the job from beginning to the end, but the check never comes. Basically, the customer didn’t meet his own end of the deal and now you’re broke. This is considered as a Breach Of Contract, and, unfortunately, it’s something individuals and small businesses must deal with on occasion. In fact, breach of contract suits are among the most commonly heard cases in small claims courts as this happens to occurs frequently.
What is a breach of contract?
The term ‘breach’ is synonymous with break, just like the broken word mentioned in the above scenario. Breach of contract can be defined as a failure to fulfill any term of a contract without a justifiable or lawful excuse. In a work place, a breach of contract might occur when a coworker refuses to complete her portion of a job; when an employee does something that is against his job contract; or when a customer prevents the contractor from satisfying the obligation or finishing the project that he was contracted for.
How does a breach of contract impact a small business?
Breaching contracts can be disastrous for small businesses and individuals. They waste both time and money, and certainly lead to frustration for everyone involved.
However, it’s a known fact that not all breaches are created equal. In some cases, if you want to move forward with a breach of contract suit, it needs to meet the criteria set by the following four breaches:
- A material breach-failure to perform a given duty as set in the contract. This is considered one of the most serious breaches ever, and allows the injured business or individual to seek damages in court. The broke contractor mentioned above might be able to claim damages in court because his client failed to perform his end of the deal. The contractor was supposed to collect his pay after the job is done. He fulfilled his part, but the client didn’t follow through with his end of the deal.
- Fundamental breaches: This can also end up in court, as this kind of violation allows the aggrieved individual to stop performance of the contract and sue for damages. For instance, if you signed a lease for a new apartment, on moving day you discovered someone else is living there, your landlord is in fundamental breach of the lease contract. You liable to sue for damages and to make him rent the apartment to you under the original agreement.
- An anticipatory breach allows one person to say the contract is broken when it becomes evident that the other party shows no sign of executing his or her end of the contract within the allotted time. Let’s say someone hires you to do chairs for her, for instance, and she’d liked the job completed by August 1. If you haven’t started by July 30, she could try to collect monetary damage because there’s no way you could get the job done in time.
- A minor breach is a partial breach. For instance, say you hire a friend to build or design a website for your business. He gets the site done and in time, but there are a few errors. You can’t sue for actual performance because he finished the job after all and in time too, you might force him to make corrections or sue for monetary damages or force him to make corrections.
Regardless of the type of contract breach, a few facts need to be established in order to build a credible case should you decide to take a breach to court, be careful as and this can get tricky-especially if the contract was verbal or implied. In most breach of contract cases, you must verify that the following happened:
- There was a contract.
- The contract was broken.
- You lost money.
- The defendant, that is, the person or business you’re challenging was responsible.
Where there is a right, there is a remedy
Regardless of the kind of contract breach you’ve experienced, you need to be aware of the types of remedies available to you. In many cases, you might just seek money to make up for what was lost from the broken contract. Common monetary damages and remedies in breach of contract cases might include the following:
- Compensatory damages pay money to the injured person to reimburse costs and compensate for losses.
- Consequential and incidental damages: These are generally awarded if everyone involved was informed of potential losses in case of a breach before and when the contract was signed or accepted.
- Liquidated damages: these are agreed damages specified in the contract.
- Punitive damages, or money given as retribution, are behavior that are frowned at or actions from the defendant. This is very rare.
- Attorney’s fees: These are recoverable as damages in contract cases when expressly included in the contract.
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