Commercial contracts are the ties that bind the business world together. However, like every relationship, circumstances can change resulting in agreements being ruptured. The key to dealing with a breach of contract is to swiftly seek advice from a Commercial Solicitor who can advise you of your legal rights and the best course of action to protect your business, commercial reputation, and cashflow.
When does a breach of contract occur?
Before investigating whether there has been a breach of contract, it first must be established that a valid contract, including an offer, acceptance, consideration, and an intention to create legal relations exists. If an agreement is in place, you need to be able to show that the other party did not perform the obligations required of them under the contract.
Breaches of contract fall into three categories:
Minor breach - where a term(s) has been breached, but the breach is so inconsequential the remainder of the contract can be performed. The injured party can sue for damages, but will not normally be allowed to terminate the agreement.
Material breach - multiple breaches have occurred, or the breach goes to the heart of the contract and therefore makes it impossible for the contract to be performed.
Anticipatory breach - where one party notifies another that they will be unable to perform part or all of their contractual obligations. The contract can, in these cases, be terminated and damages sought.
If a contract breach is established, you still need to provide evidence that the other party’s non-performance resulted in you suffering damage and that the damage was not too remote from the breach.
How should I deal with a breach of contract?
As much as we would like to think otherwise, consistently impeccable service, the timely delivery of goods and materials and the prompt payment of invoices are simply not the way the world works. As we have seen with the Coronavirus pandemic, many unforeseen factors can affect the ability of SMEs to adequately perform their contractual obligations and pay their bills on time. Therefore, often the question to ask is not whether a breach of contract has occurred, but is pursuing a legal remedy commercially worthwhile?
If you believe the terms of an agreement have been breached, the first step is to try and sort the matter out informally. If the contract relates to a large project, has international elements, or involves a mandatory or anticipatory breach, it is best to seek legal advice at the outset. However, for minor breaches, often a quick phone call or email often resolves the problem - undoubtedly, the other party has experienced a similar issue, so should hopefully have some empathy with your claim.
Should you need to instruct a Commercial Solicitor rest assured that they will make every effort to use alternative dispute resolution (ADR) methods such as negotiation, adjudication (in the case of construction contracts), and mediation to keep legal costs down and preserve the commercial relationship (crucial if a project needs to be completed). Going to Court is always a last resort.
What are the remedies for breach of contract?
There are several remedies the Court can award for breach of contract, including:
- Damages - to compensate you for any financial loss resulting from the breach.
- Specific performance - an order that the other party completes their part of the contract
- Rescission - putting the parties back into the same position they were before the contract came into existence
- Injunctions - an order that the other party take a specific action or refrain from doing something
Quick action following a breach of contract is vital to mitigate potential losses. If you believe a breach has occurred:
- Establish whether a legally valid contract exists and the specifics of the breach
- Try and resolve the breach by phone or email
- If the above does not get results, consult a Commercial Solicitor for advice
Your Solicitor will quickly let you know the strength of your position and advise you on whether pursuing the breach is commercially viable. Remember, Solicitors are business people too and the advice they provide will always be focused on protecting your best interests.
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