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How can businesses resolve a material breach of contract?

On Behalf of | Aug 24, 2023 | Business Law

Business owners and executives frequently put a lot of effort into the terms of their contracts so that they limit their own liability while locking in certain elements that are necessary for predictable business operations. For example, employment contracts help ensure that workers are aware of their obligations and what compensation they can expect for the services they provide. Vendor agreements help ensure the timely delivery of materials and proper cost control. Service agreements can help companies stay small and efficient by outsourcing certain tasks.

Yet, no matter how much effort someone puts into the creation of a contract, the risk is always there for the other party to fail to follow through on the agreement. What needs to happen after a material breach of contract affects company operations?

Documenting the breach

In order to take legal action against an individual or another business, the entity affected by the breach of contract will first need to gather proof that the breach occurred. There will need to be evidence that someone violated a non-disclosure agreement online or failed to deliver certain goods. Traditionally, breach of contract actions require a careful review of the contract to validate the belief that the actions or omissions of one party constitute a material breach of the written agreement.

Providing formal notice

Some contract breaches are unintentional. A lack of intent does not absolve someone of culpability but can influence how they respond to the issue. If someone didn’t intend to violate the contract, learning about the breach could potentially compel them to take down the inappropriate online content or make good on a promise to provide services or deliver goods. Providing legal notice also eliminates the possibility that one party could claim ignorance should the matter end up going to court.

Filing a lawsuit, if necessary

The civil courts frequently hear cases related to major contract breaches. Judges can potentially award a business financial compensation for the damages caused by the breach or even issue an order of specific performance, which can require that the other party deliver goods as promised or complete the services outlined in the contract. Although people often feel nervous about filing a lawsuit, initiating the lawsuit does not automatically mean the matter will go to court. Frequently, pursuing a lawsuit can be enough to push someone who violated a contract into correcting the matter to avoid the uncertainty of civil litigation and the possibility of significant reputation damage because of a contract breach. Many business lawsuits actually settle instead of ending up in front of a judge.

Knowing what steps to take after a material breach of contract disrupts business operations may help owners and executives take effective steps to resolve the issue. They may benefit from legal guidance at any stage of this process, given the complexity of the matter at hand and the stakes of the outcome.