In this article, an experienced Louisville contract attorney looks at the very real possibility that the terms of a contract might not be upheld by one of the parties involved.
Contracts in Today’s World
Simply put, a contract is a legally binding, written agreement between two or more entities that spells out what each party is expected to do or provide. The terms therein outline what is to be done, when, and how it is to be done, who is to undertake which tasks, and so on. Ideally, the contract is signed with the expectation that the terms will be upheld, and all will be well. Sadly, however, this is not always the case. Perhaps one of the parties was unable to meet a specified deadline. Perhaps the tasks were improperly or poorly performed, or perhaps the party ignored the contract altogether. Regardless of the particulars, one of the parties has failed to meet the terms specified, and the contract has been breached. At this point, steps must be taken to rectify the matter.
The Immaterial Breach
Before steps may be taken that are commensurate with the damages sustained, the question of whether the breach was “material” or “immaterial” must first be answered. Suppose for a moment that you, as Company A, have entered into an agreement with Company B such that Company B will ship certain equipment parts on a Friday. The shipment was made, but the parts did not arrive until 8:00 the following Monday morning. Since the parts were delivered early on the next business day, the delay might not be an issue. In such a case, although the contract was in breach because of the missed Friday deadline, the breach was immaterial in that no substantial damage was sustained by your company.
The Material Breach
In a slightly different scenario, suppose that the contract specified that the parts absolutely had to arrive no later than noon that same Friday. Again, the parts did not arrive until the Monday after the deadline had passed, and because of this your company lost a valued client who was in need of the equipment in which the parts were to be installed. Since your company was unable to complete the rush order for that equipment, thus infuriating the client and causing them to take their business to your competitors, the breach of contract that occurred was material in that you sustained substantial damages thereby.
Resolving the Breach
If no understanding can be reached through out-of-court measures such as negotiation or mediation, you and your Louisville business dispute lawyer may initiate legal action and seek remedy through the courts. There are a number of ways in which a contract breach may be resolved. These are explained below:
Monetary compensation, or damages. These may be “compensatory,” or, money paid to the non-breaching party to replace what was lost as a result of the contract breach. There may be “punitive” damages, which are meant as a penalty and are not often seen in the breach of a business contract. Punitive damages, when they are awarded, are charged in addition to the compensatory damages sought. In cases in which the breaching party did something that was harmful, improper or illegal and losses were sustained thereby, punitive damages may be sought by the non-breaching party. If no substantial loss has occurred, small or “nominal” damages may be awarded. Finally, the contract may have a clause that specifies damages in case of a breach. These are referred to as “liquidated damages.”
Court-ordered performance of the contract terms. This is called “specific performance,” and requires the breaching party to fulfill the contract. If punitive or compensatory damages are inappropriate in that they do not undo the harm done or restore the non-breaching party’s status to what it would be if the contract had been upheld, specific performance may be the best alternative.
Cancelling the contract altogether. This renders the contract void. You, as the non-breaching party, may then initiate legal action for “restitution,” thus requiring the breaching party to restore matters to the state in which they were before the breach occurred.
Speak To A Louisville Contract attorney
The Patricia A. Abell Law Office is ready to serve as your Louisville contract a and assist you in such matters as business disputes and breach of contract. Please don’t hesitate to contact us by calling 502.561.3455 today, and let us help you.