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Your business can be whole again after a breach of contract

Part of operating a business means signing contracts. You probably signed a rental agreement for your office or retail space. Perhaps, you have a contract with a vendor to supply the goods and materials you need for daily operations. Maybe you have a contract with a client that specifies that terms of payment when you provide goods or services.

In a world where contracts typically rule the business realm, it is not unheard of for one party or another to fail to honor the terms of an agreement. If this has ever happened to you, you have experienced a breach of contract. Read further to find out more about handling a breach of contract.

Breach of contract

When two parties enter into a business transaction that requires each to meet certain obligations, a contract usually exists. If one party, for example, your vendor, fails to meet the terms of the contract, the vendor is in breach. There are many reasons why a breach occurs. In some cases, it is because one party failed to perform a specific task by a certain time or perhaps does not meet the obligation at all. Sometimes a breach occurs when a vendor delivers on time, but does not deliver the correct goods. In addition, the court will categorize a breach as either material or immaterial, depending on the damages you suffer.

When a breach happens

If you have been the victim of a breach of contract, one or both of you may agree to fulfill the terms of the contract. However, if you suffer financial losses due to the breach, you might be able to take legal action to recover the damages. If you and the other party cannot come to an agreement for resolution, filing a lawsuit may be your best option. Depending on the dollar amount of your claim, you might be able to settle in small claims court. If you would prefer to avoid a legal battle, you might be able to resolve the situation through mediation.

Available remedies

When you pursue remedies for the breach of contract, you can request damages, specific performance, or cancellation and restitution. If you choose to go after damages, you might be able to fight for compensation that returns you to your original position before agreeing to the contract. Or, you might be able to sue for nominal damages, liquidated damages or punitive damages. The type of damages you should pursue will depend largely on the specific circumstance of the breach of contract and your losses.

If you opt for specific performance, the court will order the other party to make good on the contract. People tend to invoke this option when the goods or services under contract are unique or rare and hard to obtain from another source. Cancellation and restitution will essentially void the contract and return you to your original financial position as if the contract never existed.

As a business owner, there is always at least some amount of risk that another party will break a contract with you. If this happens, remember that you always have legal options available so that your business does not bear the cost of another party's breach of contract.

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