Businesses usually thrive in partnerships. Whether partnering with a supplier, a franchisee or an investor, a business owner can find various opportunities to grow their business through these contracts. But if one of the parties fails to fulfill their obligations, what can the wronged party do?
Enforcing the breach of contract clause
Typically, parties to a contract include a clause in the document that lays down the terms in the event that one of the parties fails to do their part of the agreement. For example, the contract may include terms such as payment of penalty fees or interest, if one party fails to provide their services or misses a payment. Contracts can also include specific performance clauses requiring the breaching party to complete the contract terms if no other remedy exists.
Can I file a lawsuit?
Before bringing the issue to court, parties in a breached contract can undergo dispute resolution to resolve the matter privately. However, if they fail to agree, the wronged party may sue the other in court. But bringing a lawsuit to court does not guarantee success, especially when the law does not consider a breach in the contract a crime.
Possible damages
While valid contracts are binding and hold weight in court, courts rarely award punitive damages since technically, the breaching party did not commit a crime. A successful claimant, however, may be awarded compensatory damages, liquidated damages and nominal damages, depending on the circumstances of the case.
A breach of contract can adversely affect one’s business operations and finances. It is a good practice for business owners to know what remedies they have if one of their partners fails to do their obligation.