Contracts govern the terms under which parties agree to engage in business. When a party to a contract fails to follow the agreed terms, that party may have breached the contract. Breaches of contract can occur in a variety of ways and cover a broad spectrum of actions (or the failure to take actions). Examples of ways in which parties can breach a contract include:
- Failure to perform an action promised in the contract
- Refusal to perform an action promised in the contract
- Action taken by a party that was expressly prohibited by the contract
- Action taken by a party that makes it impossible for another party to fulfill its obligations under the contract
Types of Breach of Contract & Business Disputes
There are generally four types of contract breaches: minor, or immaterial breaches, major or material breaches, anticipatory breaches, and actual breaches. As its name indicates, a minor breach is less serious than a major breach. Major or material breaches occur when a contract is only partially fulfilled, or the results of the contract differ from what was promised in the contract. Material breaches may sometimes be large enough to enable the termination of the contract.
An actual breach is a breach of contract that has occurred, whereas an anticipatory breach is a breach that is likely or predicted, but has not yet occurred. An anticipatory breach might include a vendor notifying a company that it will not be able to deliver a product by the date agreed to in the contract. That breach remains anticipatory until the date when the product was supposed to be delivered. Once that date passes, then the breach is actual and no longer anticipatory.
Businesses benefit from maintaining productive relationships with their vendors. Approaching the vendor relationship with clear communication can help foster a healthy relationship between the parties. Care should be taken with crafting the vendor agreement so that both parties are clear about what is expected from them. Once the vendor relationship has begun, it is crucial for businesses to stay on top of their vendor relationships and ensure that the terms of the contract are being met. Documenting and calculating damages from a vendor breach can help protect the interests of business to reduce damages. Additionally, this documentation is important to the efforts at negotiations that take place later. Depending upon the goals of the parties, it may be important to preserve the vendor relationship even when there is a breach of an agreement. When negotiation with vendors does not work, the matter may escalate to mediation or litigation. While most clients hope to avoid having to go to court over vendor disputes, there are circumstances in which litigation is the only option. Because of this, it is important to approach the problem of a vendor dispute as if it will eventually end up in court to ensure the preparations are complete and more likely to succeed.
When owners argue, the results can be disastrous for a business. These disputes can be difficult to navigate when there is not a clear partnership agreement or limited liability company agreement in place. Business partners hoping to prevent potential disputes that may threaten the health of their business can create a partnership agreement or limited liability company agreement that defines key terms of the agreement (e.g., roles and expectations for partners, controlling interests, capital contributions, decision-making processes, terms for removing a partner or dissolving a partnership, etc.). Defining these terms up front increases the likelihood of partner or owner disputes being resolved internally. When disputes between partners or owners cannot be resolved internally, consulting with a partnership or limited liability company dispute attorney can help business owners better understand their options for resolving the problem, whether through negotiation, mediation, arbitration, a buyout, the sale of the company, or pursuing litigation.
Breach of Contract & Business Disputes: How We Can Help
Payne & Fears’ breach of contract and business dispute attorneys have decades of experience helping business owners protect their interests. When breaches of contracts or other business disputes arise, we explain to clients the array of resolution options available to them. We regularly help clients interpret the terms of partnership or limited liability company agreements, implement partnership terms to resolve disputes, determine if a breach of contract has occurred, and negotiate acceptable dispute resolutions. We pursue non-litigation resolutions wherever possible and can navigate clients through the mediation and/or arbitration and work to achieve resolution promptly and efficiently. While business litigation to resolve breaches of contract and business disputes is not always the first path we recommend, we are ready to leverage our extensive business litigation experience to aggressively pursue and protect our clients’ interests in court when the need arises.