In a way, contracts are the law in the business world. They establish the terms of a business relationship, as well as what each party’s specific responsibilities are in that relationship, and even a small breach of the contract can have devastating consequences.
When business owners discover a breach of contract, it can be tempting to take immediate action to try to recover the losses suffered and reduce the risks posed to their business. However, to be most effective before moving forward, business owners should know the types of remedies they’re entitled to and both the downsides and costs of attempting to pursue their remedies.
THERE ARE A FEW POSSIBLE REMEDIES AFTER A BREACH
In a breach of contract case, there are typically a few theories of recovery, perhaps including:
- Requiring the breaching party to fulfill the obligations outlined by the contract;
- Obtaining monetary compensation for the damages from the breaching party and an injunction;
- Rescinding the contract and releasing both parties from contractual obligations, especially if the breach caused serious damage to the business; or
- Creating a new contract, plus repaying damages, especially if the breach occurred because of a misconception.
All theories of recovery require legal action within the time limit established by the state statute of limitations.
WHY SHOULD BUSINESS OWNERS CONSIDER THE OUTCOME BEFOREHAND?
Generally, the contract outlines the remedies for a breach of contract within its language. And if business owners ascertain their remedy beforehand, it can also help to inform their strategy for how to best proceed. Breach of contract cases can be complex.
In almost all cases, the sooner business owners contact a competent litigator, the better their chances of obtaining a quick, favorable result.