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Legal options for breach of contract

On Behalf of | May 18, 2021 | Business Law

A contract is essentially the framework upon which a business operates, whether it is between partners or contractors, for purchase or sale, lease or employment. A good contract pertains to the specific needs of the business and is legally enforceable, which ensures that it is protected in the event of a contract dispute.

Unfortunately, events take place that can cause delays or financing and performance issues that result in a breach of contract. Depending on the circumstances, a breach can be categorized as material or immaterial, and the appropriate legal action will differ for each.

Legal options

Once informal steps have been tried and failed, a lawsuit is usually the next step. If the amount is small enough, the dispute can be settled in small claims court. Although litigation has been the traditional method of seeking restitution, some businesses try out-of-court solutions, such as mediation or arbitration.

Material or immaterial breach

A material breach is the failure of performance under contract that is so serious that it essentially renders the contract null and void. Also called a total breach, the injured party may end the agreement and sue for damages. An immaterial or minor breach gives the injured party the right to sue for damages but does not excuse future performance.

There are guidelines for determining how serious the breach has been to the injured party, which will also provide a framework for an award for damages and possible excuse from performing under contract. The courts will consider:

  • The extent to which the breaching party has performed
  • If the breach was intentional or negligent, or was a mistake
  • The probability that the breaching party will continue to perform
  • The benefit the non-breaching party has already gained from the contract
  • The extent of compensation available
  • The burden on the breaching party if the ruling was that it was a material breach and that the injured party was released from the contract

Remedies for breach of contract

The main remedies for a breach of contract are:

  • Damages, which is the most common remedy, and can be compensatory, punitive or liquidated
  • Specific performance, in which the breaching party must perform the terms of the contract
  • Cancellation and restitution, in which the injured party may cancel the contract or reinstate it through restitution

For the Kentucky business owner, it is essential to have skilled legal counsel serving Newport and surrounding areas on hand to provide options when a dispute arises.