Many Kansas companies are in the business of selling goods. As a matter of business practice, these sellers often enter into sales contracts with buyers, agreeing to provide specified items to the buyers by a date certain. These contracts are more than just ordinary business documents, however. Sales contracts are legal documents, and as such, violating them can lead to significant consequences.
Contracts are subject to breach by either the buyer or the seller. Buyers agree to pay money in consideration of the supplied goods, either in a lump sum or in installments. When a buyer fails to pay as promised, it is in breach of the contract. Sellers that fail to provide goods by the specified date commit a minor breach that is curable. However, those that fail to provide the items, provide items that are of defective or poor quality or provide items that are different than those called for in the contract are in material breach of the contract.
Material breaches result in the contract itself being broken, and violators risk being sued in a breach of contract lawsuit. Litigation can be extensive, resulting in significant losses of time and money. Additionally, prevailing plaintiffs may recover consequential and incidental damages, and judges may award punitive damages for egregious breaches.
In order to avoid potentially costly litigation, it is normally a good idea for businesses to include an arbitration clause in their sales contracts. Such clauses may forbid either party from filing a lawsuit. These clauses mandate the parties settle their contractual dispute through arbitration, a form of alternative dispute resolution that is less expensive. If the arbitration clause is a binding one, then the parties will both be mandated to follow the arbitrator’s decision. In addition, making certain the performance expectations of each contracting party are clearly defined can help avoid disputes from arising.
Source: Houston Chronicle, “What Can Happen if You Breach a Sales Contract?“, Lee Nichols, December 09, 2014