Although carefully crafted business contracts reduce the likelihood of litigation, they cannot guarantee that everyone with whom you have contracted will hold up his or her end of the bargain. In such circumstances it is important to have an understanding of the basic principles of breach of contract. A breach can occur under many different circumstances and with varying degrees of impact on your business. A business-contract attorney can help answer your breach of contract questions today.

Breach of Contract Defined

When parties enter into contract with one another they make a promise to act in accordance with the agreed-upon terms. If one or more parties act in a manner inconsistent with the contract, a breach of the contract may have occurred.

What Are My Options if a Contract Is Breached?

When a contract is breached, the nonbreaching party will usually either seek to have the terms of the contract enforced by a court or seek to be compensated for the breach. Either option is considered a remedy and is meant either to put the nonbreaching party in the same or similar position as it would have been if the breach had not occurred or to compensate it for its loss.

The types of remedies available for a breach of contract pertaining to a sale of goods usually differ from those available for the breach of other types of contracts, such as agreements with contractors and employees. If the contract that has been breached pertains to goods sold, the Uniform Commercial Code (UCC) regarding monetary damages will usually apply. In addition, there may be cause for non-UCC remedies that provide for equitable relief, in other words, nonmonetary remedies.

A brief list of damages and their definitions:

• Actual damages repay the aggrieved party for actual monetary loss.
• Expectation damages compensate the nonbreaching party for the loss of what was reasonably anticipated from the contract agreement but not fulfilled.
• Reliance damages are awarded to the nonbreaching party for the loss that occurred due to its reliance on the contract.

Equitable Relief

If money damages are inadequate to compensate for the loss of the nonbreaching party, nonmonetary or equitable relief may be awarded. The two equitable remedies most common to contract disputes are specific performance and injunctions.

Specific performance may be ordered by the court when monetary damages are not adequate to remedy the breach. Specific performance requires the breaching party to fulfill the agreement and carry out its end of the bargain.

Whereas specific performance requires the breaching party to act out the terms of the contract, an injunction is usually a court order prohibiting an action by the breaching party. An injunction does not necessarily relate to the terms of the contract directly but is sought in order to prevent further loss to the aggrieved party.

Conclusion

The remedies available in a particular breach of contract situation will vary depending upon the law of the jurisdiction in question, the terms of the contract and the factual situation. Regardless of the remedies available, a breach of contract may result in a lawsuit. Litigation is often time consuming and costly to both parties, however, and therefore it is becoming more popular to resolve contract disputes through alternative methods such as mediation or arbitration.

If you believe you have a breach of contract claim or if you are facing a breach of contract claim against you, it is important to seek the advice of a business-contract lawyer. An attorney who is skilled in creating and litigating business contracts can assist you with your breach of contract concerns.

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