Handling Breach of Contract Issues: Know Your Rights and Remedies
Whether you’re a business owner involved in a dispute or an individual involved in a contractual agreement with another party, you want (and expect) all of the requirements of the contract to be fulfilled in a timely fashion and as promised. But what happens when one party to the contract fails to meet their end of the deal? Do you sue them? Seek mediation or arbitration? Give up on the contract altogether and just count it as a lost deal? Below, we’ll take a look at various types of contract breaches and some of the options available to resolve the breach in a way that is most beneficial.
As we’ve previously discussed, you must first determine that there was, in fact, a contract. Once that has been confirmed, you must look at the terms of that contract to see whether a breach has occurred. Business owners can enter into various types of contracts that have the potential of being breached, particularly if they were poorly drafted. Consider the following examples that may apply to your situation:
- An agreement to employ consultants, independent contractors and/or employees
- An agreement to buy/sell the business
- An agreement to buy/sell supplies, equipment and/or other business-related materials
- A financing agreement to buy the business and/or its inventory
- A construction agreement to build certain structures and other items for business use
- A lease for business property
- A sales agreement with your clients/customers
Now, let’s take a look at some of the more common types of breaches.
Common Types of Breaches
A Minor Breach
A partial or minor breach typically happens when some small term in the agreement gets neglected or missed altogether. The breach is something that would generally not cause enough damage to bring about a lawsuit; however, the breaching party will still need to fulfill the requirement. If the term isn’t completed as agreed upon, the breaching party may face certain consequences.
Repudiation and Anticipatory Breaches
When there’s an anticipatory breach, one party to the contract will let the other know that they cannot meet the requirements of the agreed-upon contract. Such breaches aren’t as common, but they do still happen and the breaching party can be sued. For instance, what if you’re in a real estate deal whereby you’re building office space and the builder decides to end operations and lets you know they simply can’t build the space as required. This breach causes a delay in opening your new office. In this case, you may have grounds to pursue legal action against the builder for damages.
Along the same lines, repudiation is when one party to the contract totally renounces its contractual obligations. In the same scenario above, if the builder had simply issued a repudiation notice to you, there could still be sufficient grounds to pursue a lawsuit against them, as you will have sustained certain damage due to their failure to fulfill the contract as promised.
A material breach is a serious breach that goes to the heart of the contract such that its occurrence would defeat the purpose of having a contract in the first place. In such cases, the non-breaching party can choose to simply end the contract and proceed to court to seek appropriate damages related to the breach.
For example, if you contracted with a builder to build an office directly on the boardwalk in Atlantic City as part of its planned reconstruction because you wanted to attract clients who may have been injured during their stay or visit there, but the builder proceeded to place your office nowhere near the boardwalk, that is a material breach.
What Remedies are Available for a Breach of Contract?
The damages to which a harmed party will be entitled will vary based on the specific situation that lead to the breach. Below are a few examples of some potential remedies.
Liquidated damages are typically discussed and specified within the contract. Think of it like this: Let’s say you need to close on a piece of property by a certain date which is timed perfectly for a huge promotion you are running for your business. You can add a clause to the contract that states that the seller is required to pay you $250 per day for each day beyond the closing date that the property sale hasn’t closed. That clause is what’s referred to as a liquidated damages clause.
However, please be aware that many courts do not like liquidated damages clauses and if they are grossly unfair, they will not enforce them. Accordingly, parties to a contract must ensure that any liquidated damages clauses included in the contract are reasonable and fair. Note that in New Jersey, compensatory damages are the typical remedy for breach of contract situations. Such damages work to compensate harmed parties for the economic losses that were caused by the breach.
Generally, consequential damages are other indirect damages that were caused by the breach. Contract-related consequential damages can be quite extensive. For instance, let’s say a store owner purchases specific customized software for its registers and inventory system. Suddenly, the system breaks down and as a result, the store will have to close for at least one day to fix it. One day of business losses is considered consequential damages to the breached contract.
Money damages may not be enough or even appropriate in certain situations. For example, given the uniqueness of real estate, another individual or business cannot simply go and purchase the same piece of property. In such cases, the courts may order the breaching party to perform as required by the contract. This is known as specific performance.
Need a Resolution? Speak to a New Jersey Breach of Contract Attorney About the Specifics of Your Agreement
If you are dealing with a breach of contract situation and you have questions or concerns about your rights and options under the law, contact our office today to speak to a skilled breach of contract lawyer in New Jersey for immediate assistance. Conveniently located in Cranford, our New Jersey law firm serves clients throughout the state, including Elizabeth and Newark.