"Breach of Contract" and Lawsuits
In a perfect business world, agreements would be entered into, both sides would benefit and be pleased with the outcome, and no disputes would arise. But in the real business world, delays happen, financial problems can crop up, and other unexpected events can occur to hinder or even prevent a successful contract from being carried out. Following is a discussion of the legal concept of "breach of contract," and your options should such a breach occur.
What is a "Breach of Contract"?
A business contract creates certain obligations that are to be fulfilled by the people or companies who entered into the agreement. In the eyes of the law, a party's failure to fulfill an end of the bargain under a contract is known as a "breach" of the contract. Depending on the specifics of the contract, a breach can occur when a party fails to perform on time, does not perform in accordance with the terms of the agreement, or does not perform at all. Accordingly, a breach of contract will usually be categorized as either "material" or "immaterial" for purposes of determining the appropriate legal solution or "remedy" for the breach. [More on legal remedies for breach of contract can be found below.]
To illustrate how a breach of contract might happen in the real world, assume that R. Runner contracts with Acme Anvils for the purchase of some of its products, for delivery by the following Monday evening. If Acme delivers the Anvils to Runner on the following Tuesday morning, such a breach of the contract would likely be deemed immaterial, and R. Runner would likely not be entitled to money damages (unless he could show that he was somehow damaged by the late delivery). However, assume now that the contract stated clearly and explicitly that "time is of the essence" and the anvils MUST be delivered on Monday. If Acme delivers after Monday, its breach of contract would likely be deemed "material," and R. Runner's damages would be presumed, making Acme's liability for the breach more severe, and likely relieving Runner of the duty to pay for the anvils under the contract.
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