Businesses contract with other companies to secure services, like payroll support and catering. They enter into contracts to secure supplies and to purchase merchandise for retail operations. The agreements between two businesses can lead to profit for both parties, in many cases.
However, contracts can also be a source of stress and even hardship when one company does not fulfill its obligations to another. A breach of a business’s contract might mean that one party has to idle its production line or delay the completion of a large project. A significant breach of contract may necessitate a lawsuit, which could lead to any of the potential solutions explored below.
1. The end of contractual obligations
Often, a breach of contract destroys the business relationship between the two organizations and leaves one unwilling to continue working with the other. The party that suffered the breach can potentially pursue civil action to both invalidate their contract and secure repayment for any amounts paid for services not rendered or supplies not delivered.
2. Reimbursement for damages
Sometimes, a company may not have already transferred funds related to a contract but could have suffered significant damages nonetheless. The failure of one company to fulfill its obligations to another might lead to a breach of contract involving a third party due to non-performance or non-delivery.
It could result in losses because of unused worker hours or emergency substitutions that prove to be far more expensive. Businesses that can prove they suffered financial losses because of a contract breach can often hold the other company responsible for those losses.
3. Specific performance
Sometimes, the best potential outcome in a breach of contract scenario involves the courts requiring that one business fulfill its promises to the other. A judge can enter an order of specific performance, thereby compelling one party to deliver goods or finish a project. Specific performance can be useful in cases where substitutions or replacements would be cost-prohibitive or otherwise highly inconvenient.
Oftentimes, those who are pursuing a breach of contract claim have an opportunity to settle the matter before they have a hearing in front of a judge. Having a specific outcome in mind when entering negotiations and working with a legal professional to achieve that outcome can make it easier for a business to protect itself following a breach of contract incident.