Most businesses use contracts to govern business relationships. These documents outline the terms and expectations that each business must follow during their joint venture. As long as both parties do what they’re supposed to do, the agreement should go smoothly and end amicably.
Unfortunately, there are times when one party may not do what they should. This is known as a breach of contract, which can lead to inconvenience and legal issues. In some cases, a breach of contract can cause financial loss.
Types of contract breaches
A breach of contract can occur in several ways, each of which can affect the business in a different manner. Understanding these may be beneficial for business owners.
A material breach of contract is the most serious type. This occurs when one party doesn’t meet a critical part of the agreement. In most cases, the wronged business is able to seek damages and terminate the contract.
A minor breach happens when the critical parts of the contract are met, but one business doesn’t comply with a smaller detail in the contract. This likely won’t end the entire contract, but it may result in delays and additional costs.
An anticipatory breach occurs when one business makes it clear that it can’t fulfill its obligations. They can do this through words or actions, which gives the other party a chance to determine how to proceed prior to the breach actually occurring.
Once a business experiences a contract breach, it must determine how to proceed. Some contracts include resolution methods, so that’s a good place to start. It’s best for these business owners to seek assistance from someone who’s familiar with these matters so they can protect the interests of the company.