Taking a contract breach to court

breach of contract

Business contracts do not always prevent misunderstandings or disagreements between the parties who sign them. Nevertheless, you know as a business owner that the chances are much higher of facing a serious dispute with a customer, employee, vendor or another business with whom you work if you do not have a contract in place. Strong contracts spell out the obligations of each side and the consequences if one side fails to fulfill those obligations. 

Failing to live up to the agreements in a contract is a “breach of contract.” A breach of contract can be devastating to a business, resulting in loss of income, wasted resources and valuable time diverted from other projects. When this happens to your business, you may decide to take the matter to court to seek compensation for those losses. 

Possible damages you may claim 

If someone else has breached the terms of a contract with your business, you may want to seek ways to remedy the situation before taking it to court. For example, you may try mediation or another form of alternative dispute resolution since these generally save time and money. Failing these, you may decide to go to court. Damages of less than a certain amount of money usually go to small claims court, but loss of a higher value will likely end up in state court. 

Depending on the type of contract in question, your company may be seeking one or more of the following kinds of damages: 

  • Compensatory damages, which are generally the amount of money you lost because of the breach of contract 
  • Nominal damages, which is a symbolic amount awarded after violation of your rights but no financial loss resulted 
  • Liquidated damages, which your contract may have specified that the other party would pay in the event of a contract breach 
  • Specific performance, in which the court would order the other party to fulfill its terms specified in the contract 
  • Restitution, in which the court will allow you to cancel the contract and order the other party to repay any amount you gave as part of the agreement 

Punitive damages, which serve as a type of punishment to the other party, are rarely part of an award for a breach of contract disputeHowever, in most cases, business owners are satisfied to recoup their losses and move forward after a successful breach of contract lawsuit. It is also possible that you will decide not to work with the other party in the future.