When forming a business partnership, involved parties create and execute a contract. A contract or agreement is a legal document detailing the scope of your business partnership, the rights and obligations of both parties and possible remedies when these responsibilities are not met. A violation or failure to adhere to the contract could have severe consequences, often leading to business disputes.
Types of contract breaches
A breach of contract happens when a party fails to perform any terms specified in the contract without a legitimate excuse. You can classify contract violations into two types:
- Minor breach: This is when a business partner fails to fulfill their obligation on time. For example, you partnered with a furniture maker for your interior design business. When they deliver your requested customized furniture beyond the due date, it could be considered a minor breach.
- Material breach: This occurs when a business partner renders a service different from what you agreed on. For example, your partner furniture maker delivered a desk instead of a cabinet that you agreed on.
You can also categorize a breach as actual or anticipatory. An actual breach means that the non-compliant party refuses to perform their obligations. An anticipatory breach, on the other hand, means that a party informs in advance that they will not be delivering the scope of the contract.
Legal options
You can sue for a breach of contract, whether a minor or a material breach. However, before you can file a suit, you must provide evidence that there is a valid contract between you and your business partner. You must also prove that your business partner failed to adhere to the contract’s terms and conditions. Once you have established that there is a breach of contract, you could request remedies such as:
- Damages: You can get monetary compensation to cover any losses your business suffered due to the breach of contract.
- Specific performance: You can oblige your business partner to fulfill the originally agreed-upon scope.
- Cancellation: You can cancel the contract and restore your pre-contract positions.
- Restitution: You can request the breaching party to return any payment or benefits they gained through the partnership.
A breach of contract is a common issue in business transactions, and it can stem from various reasons. If you believe your business partner is deviating from the agreement, whether intentionally or due to inability, seek legal guidance from an experienced business law attorney. Addressing the issue early on could help protect your interests and prevent further losses.