Business owners work diligently to protect the growth and profitability of their organizations. No matter the size or industry, the strength of a business finds its foundation in the contracts it relies upon for daily operation. When there is a contract dispute, however, the issue can be as minor as a vendor pricing or as devastating as the loss of proprietary data. Breaches of contract can fall into four categories.
Efficiently moving toward a legal remedy for a contract dispute generally starts with identifying what type of breach has occurred.
- Material breach of contract: These occur when one party receives significantly less benefit than what was stipulated in the contract. For example, they can include the failure to perform the contracted obligations in a timely manner.
- Minor breach of contract: In these situations, the terms of the contract might have been fulfilled, but the party in breach failed to fulfill some part of their obligation.
- Anticipatory breach of contract: As the name would imply, the actual breach hasn’t occurred yet but one of the parties has indicated they will not be fulfilling their obligations as set forth in the contract.
- Actual breach of contract: The most cut-and-dry version of the contract dispute. The breaching party has either refused to fulfill their obligations or they have performed their duties incompletely or improperly.
The best way to eliminate the need to proceed through the legal process to remedy a contract dispute is by drafting the best possible agreement. Many organizations often overlook the most readily available tools for this process – past contracts. Whether the contract was successful or did not deliver as expected, they can help identify the terms and clauses that best reduce vulnerability. For example, if you’re comparing two contracts that both resulted in breaches – and they have similar language that led to the ultimate problem – it is wise to work with a lawyer to strengthen that language. Conversely, if you’re comparing two strong contracts that directly benefited the organization, it’s wise to use those documents as inspiration for future agreements.
