No matter how well intentioned both parties are in entering into a legal agreement, unforeseen circumstances can throw things off course. If this prevents one party from fulfilling their end of the deal, it can be considered a breach of contract.

Legal obligations are created in a commercial contract and must be fulfilled by both parties. Depending on the specific terms of the contract, a default can occur when one party fails to perform on time, fails to comply with the terms of the agreement, or fails to perform at all. Generally, a breach of contract will be classified as “material” or “immaterial” in deciding the appropriate “recourse” or legal remedy.

In general, both oral and written contracts are legally enforceable, so care must be taken when entering into handshake agreements. It is always wise to ensure that your agreements are in writing to ensure that contract terms and details are not remembered differently or even forgotten. A breach of contract is defined as the failure to perform duties under the agreed terms. A contract can be breached if:

– One of the parties does not fulfill what was promised

– One party does something that makes it impossible for the other to fulfill the obligations of the contract.

– One of the parties makes it clear that he or she will not perform the duties of the contract

When one or both parties breach a contract, the other party is entitled to various types of remedies. These are the most common remedies sought:

Damage caused

The defaulting party pays the non-defaulting party an amount that returns it to the same position it would have been in if the contract was performed.

punitive damages

The defaulting party makes a payment to the other party as a penalty for breach of contract.

Damages

This type of damage is agreed upon as part of the contract itself, before it is signed. It stipulates that if one of the parties breaches the contract, that party must pay a specified amount.

nominal damages

This minimum amount is provided in the event that the non-defaulting party wins the case but suffers minimal financial loss. Other remedies for breach of contract may include:

specific performance

In some circumstances, a court may require the offending party to perform its duties as agreed to in the contract.

rescission

Either party is obligated to fulfill the obligations of the contract, as if there were no signed agreement. If one of the parties has fulfilled some of its functions, the court tries to return that party to the same position in which it was before the contract. The statute of limitations for filing a breach of contract lawsuit varies by state. If one of the parties does not file the lawsuit within the time limit specified by the state, they lose the ability to seek damages through a breach of contract lawsuit.

It is impossible to fully set out all the circumstances that may arise in the course of business. In some cases, it may even be necessary for compelling business reasons to breach a contract. Effectively written contracts can provide valuable guidance and predictability for the parties and, if necessary, the courts in determining their position.