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What is a breach of contract?

On Behalf of | Sep 10, 2020 | Business Law

As a business owner, you rely on relationships with others to remain open. Customers, workers and suppliers are all relevant to the success of your company, large or small.

In some instances, you will have to enter into legally binding contracts. Whether it is for the procurement of equipment, the construction of a new building or hiring a new employee, contracts are an inevitable and integral part of doing business.

When one party does not adhere to the agreements laid out in a contract, it can become incredibly problematic for you and your business. However, not every breach of contract is the same.

A material breach of contract

When one party does not provide your business with the service or product promised by the contract, it rises to a material breach. This break typically results in you getting something different than what the other party promised, or not getting anything at all.

A material breach releases you from further performance under the terms and conditions of the contract. As the non-breaching party, you may decide to cancel the entire agreement and seek financial compensation from the entity at fault.

A minor breach of contract

Sometimes hardships occur, making it challenging to adhere to a timeline in the contract. If one party is unable to provide an item or perform a service by a due date but can do so later, the court may consider it a minor breach. When something like a delay or a miscalculation of a product supply occurs, you may pursue remedies for this shortfall only. The remainder of the contract remains valid.

The result of a breach of contract can prove harmful to the success of your business. Depending on the contract terms, you may have the right to pursue a legal remedy in court.