If you are a small business owner, you are probably surrounded by more contracts than you realize. Between clients, customers, vendors, contractors, loans and purchase agreements, you have likely signed on the dotted line more than a few times. Unfortunately, you have also likely had to deal with other party not holding up their end of the bargain. So when does it reach a point where you can actually do something about it?
There are several situations in which a contract is considered to be breached, or in layman’s terms, broken. However, in order for a court action to ensue, there must be what is known as either a “material breach” or an “anticipatory breach.” A material breach is also known as a total breach. It takes place when a contract is irreparably broken and defeats the purpose of signing the contract to begin with.
For example, if a wedding coordinator hires a rental company to provide and set up a reception tent, but the company shows up to the wedding site without a tent, then the contract is completely breached. They have failed to perform their contractual duties; therefore, the non-breaching party’s duty to perform is terminated. The non-breaching party can then proceed with court action to recover financial losses.
An anticipatory breach can also be defined as nonperformance. It takes place when, after executing a contract, one party decides that he or she will not perform the specified duties and informs the other party of such. Even though the time for performance has not officially arrived, notification of an anticipated breach is enough to warrant court action to obtain damages.
There are many other instances in which a contract can be breached. However, they are often immaterial and do not warrant court action. A business attorney can offer guidance in recovering your financial losses if you have been the victim of a breach of contract.