Businesses depend on contracts to operate successfully. When one or more parties involved in the contract fail to meet the legal obligations, the contract is breached. Breaches can occur with vendor contracts, commercial contracts, joint venture agreements, employment contracts, supplier contracts and buy-sell contracts. Some breaches of these contracts warrant cancellation of the contract while others do not.
Understanding contracts and breaches
When you fall victim to a breach of contract, you may want to take legal action. As you consider your options, it is good to determine exactly what kind of breach occurred. Contacts contain varying levels of terms and requirements for which each party is responsible. These can include making payments, achieving sales goals or maintaining insurance. Delays or failures to fulfill these obligations can constitute a breach. You can take different courses of action depending on whether the breach is material or minor.
Material breaches are serious
The most serious failure to fulfill contractual obligations is known as a material breach. Failure to perform according to the heart of the agreement has a negative impact on the contract's value. Such substantial breaches render the agreement broken beyond reparation and defeat the purpose for the continued existence of the contract. When a breach occurs that strikes the core of the agreement between parties, the affected party can cancel the contract and move to litigation to recover monetary damages.
Minor breaches are a different story
A minor breach, also referred to as a non-material breach, is when a contractual party fails to fulfill a nonessential part of the agreement. The failure is small enough that the contract generally stays in place and all parties continue to fulfill the remaining obligations. While a minor breach is typically not grounds for canceling the contract, the affected party does have a right to litigation.
What to do in case of a breach
Sometimes the contract itself includes a guidance clause for determining what constitutes a material breach. If your contract does not state that failure to adhere to certain provisions would be a material breach, there will likely be disputes between contractual parties. In this case, you may need an experienced business attorney to resolve the dispute. An attorney can also assist you in pursuing options such as negotiation or litigation. Even if you experienced a minor breach, it can still cause serious damages. In both types of breaches, you have the right to recover your damages.