All business transactions involving goods and/or services deal with contracts in one form or another.

A contract is created when there is an offer, an acceptance of that offer, and some requirements that make the contract valid. The requirements of a valid contract state that the terms of the offer must be definite and certain, the acceptance of the offer should be clear in relation to the terms of the offer, and each party to the contract must gain some benefit from it and must have an obligation in exchange for that benefit.

If a contract is valid, then the courts will consider if it should be enforced or not.

Regardless of what type of contract parties agreed to and how good the contract was in trying to prevent disputes, disputes happen occasionally.

The performance of a contract is essential for businesses to continue their day-to-day work and all business owners seek to run a smooth business. However, sometimes business doesn’t run smoothly or problems arise with one side’s obligations under the terms of the contract.

One side may accuse the other side of not performing their obligations under the contract. When a party fails to fulfill their obligations under a contract, this is referred to as “breach of contract.”

The other parties then either want to enforce the contract or recover any damages caused.

What Happens Once a Contract Is Breached?

When a breach of contract is alleged and the two sides cannot resolve their dispute, they can seek a mediator or independent arbitrator to review the contract dispute and offer a solution in a cost-effective way that avoids a lawsuit.

If the issue cannot be resolved, a party may file a lawsuit and take the matter to court.

The court first considers whether a contract exists before deciding whether it should be enforced. It then considers any valid defenses to the contract that would make it void.

Contract Defenses

Contract defenses are reasons why a court should not enforce a contract, often due to some kind of unfairness placed upon one side or the other.

Several kinds of defenses can make a contract void, including:

• Capacity to contract
• Duress
• Undue influence
• Misrepresentation
• Unconscionability
• Public policy and illegality
• Mistake

If the court accepts that there was a valid contract and does not accept any of the defenses to the contract, it may rule that there was a breach of contract.

If a breach of contract is established, the non-breaching party is entitled to a remedy under the law from the breaching party.

Remedies for Breach of Contract

There are three kinds of remedies for a breach of contract:

Damages
Specific performance
Cancellation and restitution