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How do I respond when a contract has been breached?

Businesses are entering contracts every day which makes contracts an important component of a company's daily business. Businesses also rely on the contracts they enter into so a business owner will likely wonder what to do when they have suffered a breach of contract. As any business owner no doubt knows, contracts are an important part of doing business as they provide protections for the parties and set out obligations, rules and guidelines that govern the business relationship.

When one party to the contract fails to abide by the contract terms, it is considered a breach of contract and there are different legal remedies and options available to the address a breach of contract based on the goals and needs of the non-breaching party. It is essential for the non-breaching party to first carefully identify the breach but locating it in the contract documents. The non-breaching party may wish to send a demand letter to the party that is in breach, pointing out the breach and reminding the breaching party of its contractual obligations.

Next, the non-breaching party may wish to negotiate with the party that is in breach to determine if the two parties to the contract can reach an agreement to remedy the breach and that satisfies the parties. This can include mediation or alternative dispute resolution. If the party remains in breach after all other efforts have been made to resolve the situation, the non-breaching party may wish to file a breach of contract claim against the breaching party. A lawsuit will allow the non-breaching party to seek remedies which can include damages to compensate the non-breaching party for the harm caused by the breach.

Different remedies may be available including damages for money lost as a result of the breach, costs to have the job performed by another party or the court may order the party that is in breach to fulfill its contractual obligations. Because a breach of contract can cause significant financial harm to any business, it is important to know the options available for handling a breach of contract should one arise.

Source: Smallbusiness.chron.com, "What to Do if a Company Breaks a Contract," Accessed May 18, 2018

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