One of the most common reasons for one company to bring a lawsuit against another in business litigation is for breach of contract or breach of warranty.
In essence, a contract is a promise or set of promises enforced or recognized by state and/or federal law. If the two parties dispute the contract, or one is seen to have not fulfilled their obligations in regards to the contract, they may be able to bring litigation forward or even recover compensation.
Today, we'll take a quick look at breach of contract in commercial litigation and what kinds of compensation the plaintiff may be able to recover.
Verbal vs. Written Contracts
Many of us believe that a promise is to be kept — that is, if we say we'll do something, we intend to fulfill that promise to the letter.
Because of this, business owners may find themselves shocked when another party chooses not to fulfill their end of a "handshake contract".
We always advise business owners, big or small, to ensure that any and all contracts are expressly detailed in documentation, signed by both parties, dated, and referenced regularly to ensure that the terms of the contract are being met.
It's generally recommended to sit down with a legal representative either when drawing up a commercial contract, or at least to have it reviewed prior to signing it, to ensure that the contract is reasonable, able to be fulfilled, and will provide benefits to both parties.
These contracts also often spell out details of potential ramifications of failing to meet contractual obligations, or can even limit one business's ability to bring another to court in case of a breach of contract.
What is a Breach of Contract?
A breach of contract occurs when one party fails to perform his or her part of an agreement made with another party.
Other examples include:
- One party makes it impossible for the other to fulfill their end of the contract.
- One party absolutely refuses to fulfill their end of the bargain.
- One party makes it known that they intend not to comply with the contract before it takes effect — this is often called "anticipatory breach of agreement".
Not every breach of contract kills any potential chance of moving forward amicably, and even litigation does not necessarily mean you'll end up bringing a traditional lawsuit to court.
Instead, either direct negotiation or assisted mediation could help two commercial entities to resolve the contract dispute without needing to enter a courtroom.
Compensation and Recovery for Breach of Contract
While the amount or form of compensation may vary based on the terms of the contract, the industries each business is in, and whether litigation ends with mediation or ends up in court, different compensation and legal remedies may be available:
- Compensatory damages simply reimburse for lost costs as a result of the breach.
- Consequential and incidental damages cover foreseeable losses caused by the breach.
- Attorney fees and court costs
- Liquidated damages usually specified in the initial contract to be payable if there is a breach of contract.
- Specific performance is a rare form of remedy, requiring one party to perform as specified in the original contract. This usually comes up in breach of contract in real estate law.
- Punitive damages are monies given as a form of punishment against the party who breached the contract and acted in an especially offensive manner. Punitive damages are rarely applied to breach of contract, but may occasionally be recoverable in certain cases involving fraud.
- Rescission: a simple canceling of the contract, with both parties excused from meeting the requirements specified by it. If money was advanced, it may be ordered returned.
- Reformation requires a chance to the terms of contract to reflect the intention of the involved parties. This is most often a solution provided utilizing mediation, as it allows the two parties to move forward and continue to do business in the future.
Even serious contract disputes can sometimes be solved through mediation with a legal representative's advice and presence to help move things in a productive direction.
Mediation in commercial litigation can often save businesses the costs of going to court in a traditional lawsuit and help to restore positive or at least amicable relations between two business owners or representatives.
Dealing With a Breach of Contract in Columbia, SC?
If you're dealing with a serious breach of contract and you're just not sure where to turn, we're here to help. We'd be happy to sit down and speak with you about your business, the details of the contract in questions, and help you take a look at potential options for getting things back to business as usual. Reach us by phone at (803) 779-7599 or contact us online at any time to request your FREE consultation.