When Business Agreements Are Broken

The days of a handshake and the bond of one’s word are long gone in most business arenas. Even in your small business, you probably found out quickly that an agreement made without a contract is often an agreement that doesn’t exist. It’s not that people are dishonest; it’s more that people don’t always understand the terms they agree to. Sometimes the circumstances change, and without a written agreement, it may be difficult to alter the terms fairly.

You would think that having a written contract would dispel the chances of disputes over expectations. This is not always the case. Contracts don’t necessarily prevent those disputes, but they may provide proof that you are acting with good faith according to the agreement.

What is breach of contract?

A contract is a safety net; it provides you and another party with certain expectations. When the person with whom you have made a contract fails to abide by its terms, that person is in breach of the contract. Some examples of breach of contract include the following:

• The other party has not met the deadlines stipulated in your contract.
• The other party has not provided the product you ordered or performed the services the way he or she agreed to do.
• The other party has not delivered on his or her side of the agreement at all.

If you are dealing with the frustration of someone who has breached a contract, you may have legal recourse if your business suffered because of the breach.

Are you eligible for damages?

Of course, the first step to dealing with a breach of contract is to try to resolve the issue as rational adults. You may be able to negotiate new terms that will satisfy both sides and carry on with your business as usual. However, if the other party refuses to accept your resolution, you may have to ask the courts to settle the matter. If you are successful, you may be entitled to certain remedies called damages, such as the following:

• Compensatory damages will pay you for exactly what you lost.
• Punitive damages, although rarely awarded in business disputes, force the other party to pay you a sum as punishment for breaching the contact.
• Nominal damages are a small token if the court finds in your favor but you haven’t proven you lost money in the contract breach.
• Liquidated damages apply if you and the other party outlined them when you drafted your contract.

If you are facing a contract dispute, you are likely concerned about the amount of time and energy it is taking from the task of running a business. However, there are resources available to assist you as you seek a satisfactory resolution to your dispute.