As a normal part of conducting business, many companies enter into contracts with others in order to complete projects or manufacture products. In some cases, legal disputes arise over the performance of duties outlined in the documents. If the contract has been breached by one party, the remedy available to the other business depends on if the breach was a minor or a material.
Minor breaches are those that can be corrected. While the innocent party can seek damages for losses caused by a minor breach, they must continue to perform under the contract. In many cases, a minor breach can be solved through negotiation outside of court, avoiding litigation.
Material breaches are those that are so severe that they effectively destroy the contract. When a major breach happens, the innocent business does not have to continue performing under the contract, and litigation may be necessary to pursue damages. The court normally determines whether a breach was minor or material depending on the individual facts. In the event the court determines it was a major breach, the innocent business may seek compensation for the entire amount of the contract.
In order to avoid legal disputes and litigation, business owners may benefit by seeking the help of a business law attorney. An attorney may help draft and review contracts in a manner that clearly defines the rights and responsibilities of both parties. In some cases, an attorney may include an arbitration clause within the contract to help their clients avoid an expensive and lengthy litigation if a dispute arises. If the client suffers a breach, the attorney may be able to negotiate a settlement for damages with the breaching business, or if an agreement cannot be reached, they may represent their client’s interests in court.