What is Considered a Breach of Contract?
Contracts are an essential part of any business relationship, whether you are a freelancer, a small business owner, or the CEO of an international corporation. Contracts ensure both parties are on the same page regarding payment terms, conditions, and details about how a service will be provided or a product will be delivered. Breaches of contracts occur when one party fails to adhere to or perform one of the tasks listed in the contract. When this happens, you may need to go to court to recover damages caused by the breach. Below, we discuss how to determine if a breach of contract occurred and what to do about it.
Was a Valid Contract in Place?
There must be a legally binding contract in place for a breach of contract to have occurred. Legally binding contracts must be in writing and have the following elements:
- Offer—A service or product that is exchanged for something of value.
- Consideration—The item of value. It is important to note that not all considerations are monetary.
- Acceptance—An action that shows both parties agree to the terms. Signing a contract or putting down a deposit are forms of acceptance.
Did a Material Breach Occur?
Material breaches occur when one party fails to perform a critical action listed in the contract. You must prove there was a significant violation of your agreement that caused harm to you or your business. You must show you attempted to follow the terms of the contract and that the defendant had everything needed to perform his or her duties. Minute details like a typo in the agreement would not be considered a material breach.
Did the Breach Cause Damage?
The other party’s failure to fulfill the contract must have caused quantifiable monetary damages. Here are the types of damages that a breach of contract may cause:
General damages are direct monetary losses caused by the contract breach. They can include the cost of replacing a product that failed to be delivered.
These damages are indirect damages caused by the breach but not directly related to it. They could include profit losses due to delays in getting the product or service. To seek compensation for special damages, you will need to show you took steps to mitigate your damages as much as possible (such as finding a new vendor or doing the task yourself).
Expectation damages provide monetary compensation for the value the product or service would have provided to your business. It includes the potential profit your company could have gained if you sold the product as originally stated in the contract.
Rescission voids the contract entirely, stating the breach was so substantial that it is no longer legally binding. When this occurs, you do not need to pay for any services. The contract is canceled, and you are entitled to a full refund.
Boutty Law Firm: Central Florida Business Attorney
Contract breaches can cost your business a significant amount of time and money. Let the Boutty Law Firm defend your rights and help your business get back on track. We help business owners in Seminole and Orange counties in all aspects of business and real estate law. Call us at 407-710-0461 or visit our office in Maitland to discuss your case.