As a business owner, you have to protect your company’s interests at all costs. The best way to do this is through detailed contracts. As such you always want to make sure there isn’t ever a breach of contract.
A breach of contract is a serious matter that can cause major issues for your company. So how do you handle a situation where there’s been a breach of contract?
This detailed guide will show you what to do.
Let’s first understand the details of what a breach of contract is.
1. Learn the Type of Breach of Contract
This is when one party violates or neglects their duty as stated in a contractual agreement. A breach of contract happens without a lawful excuse.
The first type of breach of contract is a minor breach. This is when there’s only a partial breach of duties from one party. For example, if you hire someone to paint your office but they neglect to paint the front door, this is a minor breach. If you ask an IT expert to fix your computer but there are still a few issues, this is another example.
In such situations, you might not have the right to sue for negligence or breach of contract. You might be able to receive financial compensation. You might also be able to force the other party to complete their duties.
Next, there’s a fundamental breach. This refers to a drastic violation of the contractual agreement. The affected party can sue for damages. They can also terminate the contract altogether in such a scenario.
In a material breach, one party has violated/neglected one or more important duties as stated in the contract. An example could be if wages weren’t paid after work gets completed.
With an anticipatory breach, one party can attempt to collect compensation because they believe the contract cannot get honored. This happens when the other party hasn’t shown any progress or effort to complete their duties.
For example, if the office must get painted by January 1, and on December 31st the work hasn’t been started, this is an example of an anticipatory breach.
2. Prove a Breach of Contract
So how do you prove a breach of contract and move forward with a case? The first step is always to consult a business attorney on what’s the best course of action.
Other than that, you want to know what instances get considered to be a breach of contract.
Examples include:
- Failure to provide goods/services within a specified timeframe
- Failure to provide the full amount of goods/services
- Providing faulty goods or underperforming with services
- Partial wages paid or wages not paid at all
- Violation of a warranty
- Failure to show an effort to begin/complete delivery of services
Once you’ve found the instance(s) for your breach of contract, you want to look at how to prove it.
You have to clarify that the contract existed in the first place. You have to show how the other party violated/neglected a duty. You have to prove that you incurred losses and that the other party must be held responsible for these losses.
Speak to your attorney on how to prove the aforementioned criteria. Your attorney can also help you find examples that constitute a breach of contract.
3. Prepare A Before Action Letter
Once a breach of contract gets established, the next step is to prepare a Before Action Letter.
This letter will detail your claims about the breach of contract. You have to explicitly outline what breaches occurred. You have to outline how these breaches have affected your business.
This is a detailed letter that takes time to write. If it’s not written well, you might have difficulty in getting your case considered. In some cases, a Before Action Letter is enough for resolving an issue without going to court.
In the letter, you want to ask the opposing party to resolve the matter within a specified timeframe. It’s expected that you give them at least 14 days to resolve the issue before the case goes any further. This is in accordance with the Civil Procedure Rules. You also want to make sure that your letter complies with the Pre-Action Protocol.
You can also request interest on the compensation that you ask for. The interest rate you specify has to be stated in the letter.
You have to end your letter by stating how you will further pursue the matter if the issue is not resolved within the specified timeframe.
Make sure to ask your attorney to help you prepare your Before Action Letter.
4. Choose Your Remedies
So what can you expect as compensation with a breach of contract case?
You want to consider what remedies you want to pursue in case the matter is not resolved beforehand.
There are several types of remedies, with the following being the most common:
You can receive compensatory damages. This is when the defendant pays back any costs plus compensates for losses incurred.
There are also consequential and incidental damages. This is compensation that gets awarded when the defendant was aware of potential losses in the event of a breach.
If you want a specific amount of financial compensation, this is called liquidated damages.
If the defendant performs any offensive or harmful acts toward the plaintiff, punitive damages might get requested. This is in addition to another type of compensation.
If you wish for the defendant to complete the work they didn’t, you can request a specific performance. This forces them to finish their work or remedy any issues with their services.
In a rescission, the contract gets canceled and all monies have to get returned. If you wish for the contract to get re-written and the work to get restarted, this is called a reformation.
Good Luck With Your Proceedings
Now that you know what a breach of contract is and how to handle the issue, we wish you good luck with the proceedings. Take your time to prepare your case before consulting an attorney. Once you have the details, your attorney can help you prepare your case.
Make sure to share this guide with your fellow business owners.
For more important guides on business and entrepreneurship, check out the other content on our website.