When two or more parties come together and decide to make a business deal, the next step is to make a contract that goes over all the details. The contract will entail the expectations and responsibilities of each party to the deal. There are other things to consider, especially in relation to breach. A good contract will contain what to do about instances of breach of contract to simplify and expedite an already unfortunate situation.
Since a contract is a binding agreement signed by both parties, it can obligate the parties in the contract to uphold certain elements. While it can’t always force a party to complete their end of the bargain, it can serve as a remedy in case of breach. For example, parties could agree to binding arbitration in scenarios where breach of contract occurs or to a specified damage minimum in case of material breach. Ideally, parties would avoid breach of contract, but, sometimes, things happen that cause a company to breach a contract.
For example, company Y could be in contract with company X. While these two are obligated by contractual obligation to each other, let’s say company X is involved with company B in acquiring the key components to a successful contract with company Y. However, company B fails to get company X what they need to meet contractual obligations with company Y and it lands them in a state of material breach.
The point of this example is that unforeseen consequences can come up and interfere with a party’s ability to meet their contractual obligations. This can quickly result in breach, despite a party’s best efforts. This is why having a rough outline for how breach of contract should be handled is always a good thought to save yourself more stress and effort than necessary. While unwanted, governing a plan in cases of breach of contract is beneficial for damage control.
Source: FindLaw, “Breach of Contract and Lawsuits,” Accessed March 26, 2018