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If you own any business, you know that contracts form the basis of your interactions with other companies. Contracts keep everyone on the same page about duties, expectations, and compensation. Your contractors, suppliers, collaborators, partners, and other contractual relationships keep your business growing. When a breach of contract occurs, your relationship breaks off, and someone suffers lost money or time. In short, a breach of contract is a broken promise.
Contract Breaches
Contracts begin with an offer of monetary consideration, goods, or services to another party for their monetary consideration, goods, or services. When either side refuses to honor the agreement, it may catch you off guard and leave you feeling betrayed.
Sometimes you are the one who pays someone who leaves you with promises unfulfilled. This breach can cost you time, money, and even your health. Stress and worry can cause sleepless nights and anger at your losses, raising your blood pressure. You may want answers and for the other party to pay damages or honor their promises.
When You Breach a Contract
In the reverse situation, you could be the one who broke the contract and are now in breach. Sometimes life circumstances make breaching a contract your only viable option.
For example, let’s say you and your husband own a digital arts company. You film a wedding together. In the contract with the married couple, your husband has agreed to edit the raw video footage and make a unique video compilation with professional coloring, effects, and soundtrack backing. However, your husband falls ill and is in the hospital indefinitely. The couple calls repeatedly, and you are unsure how to handle the situation.
When You Can Salvage a Situation
In most cases where there is a breach of contract, the one suffering damages expects you to honor the agreement and pay any associated damages for time or money lost. They expect compensation for the lost goods or services.
In the case of the wedding video compilation, perhaps you know another video editor who can turn the raw footage into what the couple expects. You may lose a bit of money paying the new video editor since your husband could not complete his job. However, losing a bit of money and keeping your contract intact keeps your client happy and keeps your business’s reputation intact.
Because you found a way to fulfill your contract without costing the couple any additional money or time, both parties to the agreement are happy, and there is no breach of contract.
Honoring Contracts Protects Your Business’s Reputation
When you fail to honor a contract, you risk your reputation as a business. A contract is a written embodiment of the trust you place in each other to enact your duties as stated. Your trust relationships are the basis of your business.
Under the law in Texas, if you breach a business contract, you must remedy the harm you caused to the other party. Usually, if you can’t resolve issues with the other party amicably, the damaged party seeks legal recourse.
Negotiate With the Other Party
In the same example, let’s say you can’t find anyone to edit the video. You decide to tell the couple that your husband will edit the video when he gets out of the hospital. The couple gets angry and begins to call and harass you. You quit taking their calls and hire an attorney. The couple also hires an attorney.
Often, with attorneys involved, the two sides better understand the contract they signed and the legal remedies in their particular situation.
Every contract is different, and if yours gives particular wording that allows you six months to finish the job, then your attorney may counsel you to wait five months before dealing with the situation.
Your attorney would then negotiate with their attorney. You may agree to have deliverables ready by the six-month mark or refund their money and turn over all raw video footage.
In this case, the attorneys negotiated a solution for your breached contract.
Going to Court
Sometimes, both sides become unreasonable, and there is no solution beyond taking the case to court. If the couple in the example above demands monetary damages above and beyond what you’ve offered, you may choose not to give in.
Let’s say six months go by, and your husband has now passed away. You are struggling with grief and trying to make it through each day. A computer virus erases all of the raw footage from the wedding. There is now no video available for the couple’s wedding day. They are infuriated and want a complete refund plus an additional $50,000 for the loss of time and memories that they can never get back.
You don’t have $50,000 just laying around to give them. Closing your business seems like the best solution for you right now. You are no longer worried about your professional reputation. You want this to end without losing the shirt off your back.
In this case, you’ll need an experienced business litigation attorney to represent you in court. Your attorney may argue that you were not a signatory on the contract and only held a supportive position within the company. Perhaps your attorney could defend you by helping you set up a bankruptcy or by claiming that you had justifiable reasons for breaching the contract due to unforeseen circumstances. After all, you did not know what would happen or cause it to occur intentionally.
The wronged couple may try to prove the existence of the contract, that your company owes an obligation that it failed to honor and that you owe them damages. Depending on the wording of your contract, the proof of its existence, and whether you upheld your end of it, the court could rule in different ways.
A court may choose to:
- Award monetary damages to make the wronged party whole again
- Demand a specific compensatory performance
- Allow for contract cancellation and some restitution
Contract Law
Whether you are the wronged party or the one who breached the contract, the complicated nature of contract law makes it difficult as a civilian to negotiate your way through. Often heightened emotions govern your and other’s minds. Hiring an attorney who understands contract law, how to negotiate, and litigation can help you get through this situation with the least amount of damages.
We Can Help
At Jarrett Law, we understand that your business needs rock-solid contracts to stand on. When you face a breach of contract, you need an expert to walk you through the possibilities. As an experienced business and litigation attorney team, we come alongside and support you through the entire process, from meeting with the other party for negotiations to looking for contractual loopholes and any necessary litigation. We are here for you. Contact us today and find out how we can help.