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 then seek a mediator or independent arbitrator to review the contract dispute and offer a solution in a cost effective way which avoids lawsuits. If that doesn’t resolve the issue, a party often will file a lawsuit to take the issue to court. The court first considers whether a contract exists before deciding if it should be enforced. Then it considers any valid defenses to the contract that would make it void. Contract defenses are reasons why the court shouldn’t enforce the contract, often due some kind of unfairness placed upon one side or the other. There are several kinds of defenses that make a contract void, including: capacity to contract, duress, undue influence, misrepresentation, unconscionability, public policy and illegality, and mistake.

If the court accepts that there was a valid contract and it does not accept any of the defenses to the contract, then it may rule that there was a breach of contract. If breach of contract is established, then the non-breaching party is entitled to a remedy under the law from the breaching party. There are three kinds of remedies for a breach of contract: damages, specific performance, or cancellation and restitution.

Why Should Breaching a contract be avoided?

There are a lot of reasons why a breach of contract should be avoided. Besides the types of remedies that a breaching party might have to pay to a non-breaching party, a contract breaching party can also face other types of problems. A breach of contract could cause damage to the reputation of a business, damage business relationships, and it may cost significant time, energy, and money spent in the courts.

In order to avoid all of those problems, it is crucial for a business to ensure that their contracts are drafted thoroughly to protect their interest and ensure that contracts resolve any foreseeable disputes or complications in the future. In addition, it is essential for a business to make sure that they fully understand any and all contracts before signing and ensure that they abide by the contracts after signing them. Therefore, a business should consider the advice and support of an experienced business and contract law attorney.

At Raheen Law Group, we can assist you with reviewing and understanding prior to signing a contract or agreement to preserve your rights, interests and needs.  We can also assist you with drafting a contract, negotiating the terms of a contract, enforcing the terms of a current contract, or pursuing legal action due to a breached contract.

If you need help understanding, creating or enforcing a contract, contact us for a consultation.