Breach Of Contract — From Minor To Serious — And What To Do Now
Once you and a business vendor sign a contract, you naturally move forward on the belief that said contract will be fulfilled. But what if it's not? How should you proceed when something goes wrong? The answer starts by determining which of the four types of contract breach is happening. This then informs how you should handle it. Here's what you need to know about each.
A minor breach of contract is confined to one or a few elements that don't negate the entire contract. If you contracted with a vendor to provide 100 widgets for you to resell, for instance, a minor breach might occur of the vendor is late with the shipment or if some of the widgets are faulty. While technically a breach of their duty, these are problems that you can likely overcome or correct.
Pursuing legal action for minor breaches may not be worth the cost unless they turn into more material issues.
A fundamental breach is something that makes it impossible for the contract as a whole to be fulfilled. In the widget contract, if the party buying the widgets fails to pay the down payment, the other company has received no funds with which to make the widgets. The financial foundation of the contract is broken in a way that it can never be fulfilled.
Because it's a fundamental issue, you may need to seek financial damages for the expense you've incurred or enforcement of the contract's terms. If you've sunk money into the widgets, you deserve compensation for the other's failure to follow through.
Certain elements of the contract are the most important ones. They are usually related to the purpose of the contract and the mutual benefit it espouses. If the vendor fails to deliver the contracted order of widgets at all, they have failed their end of the bargain in a 'material' way. The contract's entire benefit hinged upon this performance. As with fundamental breaches, you can seek compensation for your losses.
You don't always have to wait for the entire contract term to be over before you take action over a breach. Anticipatory breaches happen when it becomes clear that one party will not fulfill the contract in the future. Say the vendor making the widgets you ordered closes up shop and goes on a holiday with no plans to return in time to make the widgets.
You can start legal action even though the contract terms haven't expired. The goal is to either get preemptive financial compensation to find another vendor or to enforce the contract before it's too late.
Although every company hopes that its contracts will all work out well, understanding how and when to seek legal remedies helps keep a breach from turning into a disaster. Learn more by speaking with an attorney experienced in business transaction law services today.