What Happens if Someone Breaches Contract?

Business contracts are a key component of the way any company functions, but they also pose a certain amount of risk to those involved. After all, if one party fails to live up to their end of an agreement, it can lose your company thousands of dollars.

Fortunately, a well-written contract will protect your interests, and a breach can be remedied either with repayment of monetary damages or through other means.

Types of Breaches

First off, the results of a breach of contract depend on the type of breach. There are various types of breaches, including:

  • Material breaches, in which one party experiences a loss because of another’s a clear failure to adhere to the contract
  • Fundamental breaches, in which the breach prevents anyone else from carrying out the contract
  • Anticipatory breaches, in which it looks probable that one party will not fulfill their part of the agreement
  • Minor breaches, in which one party partially breaks the contract

In order to qualify for any kind of remediation, a breach must have caused some loss to you. Otherwise, from a legal perspective, there’s not much that can be done.

Proving a Breach of Contract

When a contractual agreement is broken, you must be able to prove the following in order to recover damages:

  • A contract existed between you and the other party (or parties)
  • The contract was in some way broken
  • The other party was responsible for the breach
  • The breach of contract caused you some kind of monetary loss

If you have sufficient evidence to prove these items, then you most likely have a viable case.

Seeking Damages for Breach of Contract

When it comes to breaches of contract, there are a number of different possibilities. There are several types of damages that may be awarded to the offended party in a breach of contract case, including:

  • Compensatory damages, which are merely compensation for any losses suffered
  • Nominal damages, which are token damages awarded in a breach of contract case
  • Liquidated damages, or damages specifically indicated within the contract
  • Punitive damages, designed to punish those responsible for the breach

Of all of these, compensatory damages are the most common. Punitive damages are very rare in these types of cases, and they only occur when the breaching party did something particularly negligent or offensive.

Additional Remedies

Ultimately, the purpose of damages is to make sure the non-breaching party is restored to the same position they would have been in had no breach occurred. However, there may be times when monetary compensation isn’t sufficient to achieve that result, in which case other remedies may be in order. These include:

  • Specific performance, in which the breaching party is ordered to carry out their part of the contract
  • Rescission, in which the contract is canceled and any money involved is returned
  • Reformation, in which the contract is revised and modified in order to better meet the needs of both parties

These remedies may be ordered by a court, or they may be determined through mediation or arbitration. In either case, legal representation is recommended, especially in cases where the stakes are high. Hart David Carson LLP assists with contract drafting, dispute resolution, and corporate law, so contact us if you are in a breach of contract situation.

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