Solutions for Breach of Contract in Business
Businesses rely on contracts to ensure expectations are met and obligations fulfilled. But what happens when one party fails to uphold their end of an agreement? Breach of contract, though common, can have detrimental effects like delayed operations, financial losses, and damaged relationships. As a business owner in Philadelphia, knowing how to respond is critical.
Defining Breach of Contract
Before diving into solutions, let's review what constitutes a breach of contract in business. A breach occurs when one party fails to perform according to their contractual duties without legal excuse. This includes:
Failing to deliver goods/services as promised
Delivering defective or substandard goods/services
Failing to pay on time per the agreement
Violating a material term of the contract
Actively interfering with the other party's performance
Breach can be minor or material - the latter enables the non-breaching party to terminate the contract. But in either case, action should be taken to remedy the situation.
1. Send a Notice of Breach Letter
The first step attorneys recommend is sending a formal notice of breach letter. This letter should:
Identify the specific breach
Demand the party rectify it by a certain date
State consequences if they fail to remedy
Notifying the breaching party in writing begins a paper trail. It also allows them the chance to correct their actions before further steps are taken.
2. Seek Mediation Services
Litigation can be time-consuming and expensive - that's why commercial litigation attorneys often suggest alternative dispute resolution as a first option. Mediation involves:
An impartial mediator facilitating discussion
Parties explaining their perspective and priorities
Negotiating a mutually agreeable solution
Mediators help find common ground, aiming to resolve the issue through compromise rather than courts. Many breaches simply arise from misunderstandings, making mediation a viable fix.
3. Request Arbitration
When mediation fails, arbitration is another alternative to litigation. During arbitration:
Each party presents evidence to a neutral arbiter
The arbiter makes a binding decision to settle the dispute
Arbitration resembles a streamlined trial without lengthy proceedings or unpredictable jury verdicts. The private setting may also help preserve business relationships.
4. File a Lawsuit for Breach of Contract
If out-of-court resolution proves impossible, filing a breach of contract lawsuit may be necessary. To succeed in court, the plaintiff must prove:
A valid contract existed
The defendant breached material terms
This breach caused identifiable damages
Commercial litigation lawyers handle these cases, marshaling evidence to demonstrate the breach and justify requested remedies.
5. Request Equitable Relief
Rather than monetary compensation, plaintiffs can pursue equitable relief by asking the court to order specific performance or injunctions.
Specific performance - the breaching party fulfills duties per the contract
Injunction - the breaching party is legally forced to act or prohibited from acting
Equitable remedies aim to repair the relationship so parties can proceed as intended. However, courts don't always grant them.
6. Recover Monetary Damages
When equitable relief is denied, plaintiffs can recover monetary damages for:
Loss of expected profits
Costs incurred from the breach
Payment owed under the contract
Attorney fees and court costs
Commercial litigation lawyers quantify these damages to recoup losses stemming from the breach. Securing damages is typically the main financial goal.
Send a breach of contract notice letter
Try mediation or arbitration first
File a lawsuit if unresolved
Seek equitable relief like specific performance
Recover monetary damages if available
Detailing the breach in writing, pursuing alternative resolution, and knowing litigation remedies will help companies respond effectively. Partnering with experienced Philadelphia commercial litigation attorneys also provides invaluable guidance.
With the right approach, businesses can overcome the challenges of breach to uphold their contractual rights. The solutions outlined above serve as a roadmap for navigating these complex situations.
5 FAQs About Breach of Contract
Still have questions about breach of contract? Here are answers to 5 FAQs from our Philadelphia commercial litigation lawyers.
1. What are signs a breach of contract has occurred?
Signs include failure to deliver goods or services per the contract, providing defective or inferior goods/services, not paying on time, infringing intellectual property rights, sharing confidential information, violating exclusivity terms, terminating without proper notice, and more.
2. What happens if breach of contract is ignored?
The breaching party may continue violating the agreement, causing escalating damages. Plus, ignoring breach relinquishes your contractual rights to seek recourse.
3. Can contracts require mediation for breach?
Yes, clauses like mediation provisions and arbitration agreements can mandate alternative dispute resolution processes to handle breach.
4. When does breach allow contract termination?
If the breach is severe enough to undermine the fundamental purpose of the contract, the non-breaching party may have grounds to terminate.
5. Are verbal agreements still legally binding contracts?
Verbal contracts are binding but harder to enforce. Written contracts provide stronger evidence if breach of contract litigation becomes necessary.