Breach of Business Contract Lawsuits

Businesses use many types of contracts in their daily operations. A contract is an agreement between parties to perform as promised. Business contracts range from the sale of goods to commercial real estate leases. Small business owners rely on contractual promises to run their companies.

A party to the contract not performing as promised can create problems for the non-breaching party. Business owners can lose out on other business opportunities or have to pay more for the goods or services they need. If your business has suffered, you can file a breach of contract lawsuit to recover damages.

Contract law depends on state and federal regulations. To find out about your legal options after a breach of contract, talk to a local business lawyer for legal advice.

What Is a Breach of Contract in Business?

A contract spells out the rights and obligations of the parties involved. This can include a promise to exchange money, services, or goods. When one of the parties doesn’t fulfill their obligations, it’s a breach of the contract.

To file a breach of contract lawsuit, you generally need to show:

• There was a valid contract
• You met your obligations under the contract
• The breaching party failed to uphold their end of the deal
• You suffered financial loss or harm caused by the breach

What Are the Types of Contract Breaches?

A breach of contract can involve a significant issue or a minor breach. A minor breach may not be serious enough to justify a breach of contract claim. However, a material breach is a more serious failure that goes to the purpose of the contract.

Your legal remedies generally differ between a minor breach and a material breach. For a minor breach, as the non-breaching party, you can still recover any damages for the non-conforming products. But you probably can’t rescind the contract. With a material breach, you could take more serious legal action, including canceling the contract.

For example, your business contracts to buy 1,000 boxes of glass bottles for a food product. If 20 bottles arrive broken, that is a minor breach. The other company could refund some money or send additional bottles. But suppose the other company ships 1,000 boxes of metal bottles. The contract aimed to purchase glass bottles, but metal bottles are a different product. This would be a material breach.

When Does the Breach Occur?

The breach happens when one party fails to perform under the terms of the agreement. This generally happens when there is an actual breach. However, in some situations, you can file a breach of contract claim before the performance of contractual duties is due. This is an “anticipatory breach.”

For example, a construction company has a contractual obligation to build you a parking structure by a specific date. The construction company tells you a month before the due date that the cost of concrete has increased, and they won’t finish the project. Even though performance isn’t due for another month, you can file a claim for an anticipatory breach of contract.

Are There Legal Defenses to Breach of Contract Disputes?

There are legal defenses to a breach of contract claim. Possible defenses include:

• Void or not enforceable contract
• Justified nonperformance
• No damages
• Expired statute of limitations

For example, courts generally won’t enforce illegal contracts. If you contract with a criminal to burn down a competitor’s business and they don’t perform, you can’t sue them for the breach.

In some situations, nonperformance is justified. Impossibility is one excuse for nonperformance. For example, say you contract with a painting company to paint your headquarters. Your building collapses in an earthquake. Performance is impossible because the building was destroyed.

Oral contracts are generally still enforceable. However, it’s difficult to prove your case without a written contract. Getting contract terms in writing and signed by both parties helps protect you in the event of a breach.

What Damages Are Available for a Breach of Contract?

In a breach of contract lawsuit, you can seek damages to compensate you for your losses. Different types of damages are available in business contract law cases, including:

• Compensatory damages: The most common type of monetary damages, these are for the actual damages or losses involved. This can be the cost of repair or replacement.
• Special damages: Also known as consequential damages, these are for the loss of profit or revenue caused by the breach.
• Liquidated damages: Parties agree to the amount of liquidated damages in the contract. This can apply to contracts where a breach does not have a clear monetary value.
• Punitive damages: These punish the party responsible for the loss, but are rare in business contract cases.

There are also equitable remedies. Remedies in a breach of contract case include:

• Injunction: An injunction is a court order that compels the breaching party to do something or refrain from certain actions.
• Specific performance: Specific performance requires the breaching party to perform under the terms of the contract.
• Rescission: Rescission allows the non-breaching party to cancel the contract.

How Can a Business Contract Lawyer Help?

A business lawyer can review your case and identify your legal options. If the other party breaches the contract, your lawyer can negotiate for a settlement to avoid business litigation. You can also use arbitration or other alternative dispute resolution to settle a dispute without going to court.

If the other party won’t pay up, your lawyer can file a breach of contract claim to collect the damages. If you suffer financial losses after a contract breach, talk to an experienced business lawyer about your legal rights to recover compensation.