Whether business to business or between individuals, contracts are the basis of a business agreement that encourages confidence in a business relationship with another party. Business disputes often involve allegations of breach of contract.
What is a Breach of Contract?
A failure to perform on a contract altogether is less common than disputed claims, or partial performance. How courts interpret contracts is partly a matter of case law or precedent (i.e., what courts have done in prior similar circumstances). In other situations, courts sometimes hold contracts to be invalid. Reasons for this result include failure to satisfy the basic requirements of a contract, or fundamental unfairness and unconscionable terms.
In reviewing a business lawsuit, the court can order various remedies for breach of contract and related claims. They include:
• Compensatory Damages: damages that make whole the prevailing party for its losses.
• Liquidated Damages: pre-set damages agreed by both parties at the time of the contract and when damages are difficult to calculate.
• Rescission: restores the parties to the condition they were in before the execution of the agreement.
• Specific Performance: when no other remedy (like money) will put the prevailing party in the same position had the breaching party performed. The court can order the contract performed in full.
The parties must draft clear contract terms. A court will frequently rely on the plain meaning of the contract’s language and terms. Preparing it properly from the outset and setting forth the rights and responsibilities of the parties is the best method to prevent costly litigation and disputes in the future.