Most businesses will enter into written contracts in order to procure or provide needed goods or services. In the event a party breaches a contract, the other business may suffer losses because of its reliance on the contract’s performance.
In some cases, a contract breach may be relatively minor. In those instances, it is likely to be able to be resolved by the businesses without necessitating court litigation. For example, in the event that a business is late in providing goods, the two businesses may negotiate that the delinquent party pay the other the amount it lost due to the delay.
When there is a major breach, or one that destroys the very heart of the contract, litigation may be necessary. Through contract litigation, the injured business may seek and receive various types of damages, depending on the nature of the breach. Compensatory damages may be awarded to put the business back in the place it would have been if not for the breach. If the contract called for specific damages, known as liquidated damages, those may be ordered. Punitive damages, while very rare, might be ordered in especially egregious cases. Injured businesses might also seek an order for specific performance in which the court orders the other business to perform as contracted.
Sometimes a contract dispute may arise when one business wrongly believes the other has committed a breach. In order to avoid situations like this, it is important for businesses to make certain the contracts they draft are drawn carefully and clearly. By expressly defining the roles of the respective parties and outlining the expectations of performance, disputes may be avoided. Companies may want to seek help from a business and commercial law attorney in drafting and reviewing proposed agreements prior to entering into them.
Source: FindLaw, “Breach of Contract and Lawsuits”, accessed on Feb. 16, 2015