Small business owners can find themselves in hot water sometimes over their contractual obligations to other businesses or their customers and clients. Business contracts are legally binding agreements between two parties wherein one party agrees to perform a service or provide something of value for an agreed-upon sum.
When one of the parties fails to honor their obligation, that contract has been breached. What happens next depends on the circumstances.
Not all contract breaches are equal
Breaches of contract are deemed to be either immaterial or material under the law. How the breach is categorized determines whether there is a cause of action to seek civil damages.
But what makes the difference? Basically, it comes down to whether one person suffered economic or other significant damages due to the breach.
Immaterial breach example
You’re a Fort Lauderdale business owner who ordered 20 cases of drink cozies to be delivered. The delivery was set for a specific date, but inclement weather along the eastern seaboard delayed the trucker hauling your supplies. The driver arrived a day late with your order intact.
So, while the delivery delay technically breached the contract between you and the supplier, you suffered no significant losses or damages and would not prevail in a lawsuit.
Material breach example
Now, suppose you are a bride about to marry. The wedding dress you ordered did not arrive in time for the ceremony, causing you economic and other damages. Given these circumstances, this would likely be considered a material breach, and thus, financial recovery through litigation could be possible.
Some cases are not always so clearcut
While the above hypothetical cases appear to be clear, many breaches of contract are far more nuanced. Learning more about your legal options in such cases can provide you with the clarity you need to determine your next move.
