3 Types Of Contract Breaches Your Business Needs To Know
Posted on: 12 September 2019
Contracts are central to the day-to-day operations of any business. A successful company must have contracts with employees, vendors, and customers to enjoy legal protection. A breach of contract is cause for serious concern.
You must be prepared to take legal action if any contract between your company and another person or business is broken. The first step is identifying the type of breach that occurred.
1. Fundamental Breach
A fundamental breach occurs when one of the parties to the contract is able to break their end of the agreement with minimal repercussions. Many contracts have clauses written into them that outline potential reasons why the contract might legally be broken.
If your attorney reviews the contract that you suspect has been breached and finds one of these clauses, you may not be able to sue the other party for damages. This is one reason why it can be beneficial to have a business attorney review all your contracts before they are executed.
2. Minor Breach
A breach that occurs unlawfully entitles you to take legal action against the party in violation of the contract. The severity of the breach will be a driving factor in determining how much money you can recoup in court. A minor breach occurs when the contract breach has very little effect on the financial well-being of your company.
A judge will likely only grant access to compensation for actual damages that your attorney can offer valid proof of in a minor breach case. You will need to work closely with your attorney to determine if the cost of taking legal action outweighs the potential compensation that you could receive for a minor breach.
3. Material Breach
The most serious type of contract violation is a material breach. This type of breach usually results in significant damage to your company. Damages can be actual revenue lost as a result of the breach, or they can be the estimated future revenue losses that you may sustain as because of the material breach.
Due to the severity of a material breach, your attorney will likely suggest that you pursue the matter in court. You can request compensation for actual damages as well as any legal fees you incur when filing a lawsuit for a material contract breach.
The services of a reputable business litigation attorney can be invaluable when you encounter problems with any of the contracts you rely on to conduct business each day.
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