Contracts signed by parties in a business venture are put into place to protect everyone. In many cases, the terms of the contract are fulfilled and both parties leave satisfied.
However, what can you do when a contract you’ve made has been breached?
There are several different approaches, but before pursuing any of them, it’s best to examine the actual contract to determine if a breach happened. Hiring counsel is recommended.
A breach of contract for materials or services occurs when one of the parties involved fails to timely deliver goods or services. Either way, the party relying upon timely delivery may suffer damages due to the late or non-delivery. To help protect your right to damages in these situations the contract should contain a clause indicating “time is of the essence”.
So how can you determine if a breach of contract occurred?
Consider this example: You hire a company to create a website for your business. By contract, that site is to consist of 5 pages and must be “live” within 8 weeks of signing the contract.
So you wait for two months and the site is published on time, but it only has three pages, instead of five. The design company refuses to add two more pages. It could be said that a breach of contract has occurred since you as the customer were relying on the additional two pages of content for the website.
After a contract has been breached there are several different courses you may take in order to settle the dispute.
Both parties can meet and discuss how best to resolve the problem. Both parties can agree to mediate the dispute, with or without counsel. A mediator is hired who will review the contract, hear testimony and the arguments before issuing a decision. Binding arbitration is a third option. Unfortunately, many disputes cannot be resolved amicably and a lawsuit is filed by the non-breaching party. If the amount of money owed is under $5,000 you may take the case to District Court as a small claim. If your claim is between $5,000 – $30,000 you may file in District Court or Circuit Court. If the amount in controversy is $15,000 or more, a jury trial may be prayed in Circuit Court. For amounts over $30,000, the suit will have to be filed in Circuit Court.
Whatever method is employed to resolve a contract breach, the end result may be (if proven) that damages are awarded to the party who originally claimed a breach occurred.
The most common damages awarded are:
- Compensatory – monetary in nature, the award replaces what was lost and may include lost profits.
- Punitive – the breaching party must pay an amount above what the original contract stipulated. This is seen as a form of punishment for breaking a contract and is rarely awarded. Actual malice must be established to warrant punitive damages.
- Nominal – awarded to the non-breaching party to signify a breach occurred but damages were either not established or were simply minimal.
Contracts are created to ensure that both parties get exactly what they agree to, so it’s best to review a contract with counsel before committing to it.
When a contract is breached, consulting an attorney may save you time and help you recover most, if not all, of the money that was originally paid or help you recover your damages resulting from the breach.