Contract disputes in businesses can arise for many reasons. The most common form of dispute results from breach/es of contract, whereby one or more parties fail to meet their obligations under the Contract.
Given the myriad of clauses that form part of a contract, it is important to understand the reasons for breaches of contracts and the different types of breaches, so that you can take measures to protect yourself and/or your business from future disputes or litigation.
Types of breaches of contract
Businesses constantly undergo stresses, more recently resulting from the ongoing COVID-19 pandemic. Therefore, the evident increase in contract disputes, namely breaches of contract, comes as no surprise. Generally, there are four primary types of breaches of contract that can occur:
- Material Breach: This constitutes a significant breach of a key element of the contract, where a party has failed to perform their obligation(s) under the contract, resulting in the other party/ies being substantially disadvantaged.
- Minor Breach: This occurs when only part of the obligations in the contract are performed by a party. It is easier to remedy a minor breach. Often, the breaching party can agree to perform their obligations, or the impacted party can seek damages.
- Anticipatory Breach: This is a breach that has not yet occurred, where one party indicates to the other party that they are either unable or unwilling to fulfil their obligations under the contract.
- Actual Breach: This is the most common form of breach, which occurs when a party fails to perform their obligation under the contract.
Legal remedies for breaches of contract
Given Business Contracts are legally binding, there are a variety of remedies available when breaches occur. Our Sydney Commercial Lawyers have extensive experience in dealing with breaches of contracts and can assist in finding the best solution for your business. Common remedies include:
- Negotiation: It is recommended that you attempt to resolve the dispute by first negotiating with the other party/ies. If you have attempted this, however to no avail, a Letter of Demand may need to be issued, which constitutes a formal demand and notice for the remedy you are seeking. Our Commercial Lawyers can assist you with this process.
- Termination of contract: In certain circumstances, where a material breach has occurred, you may be able to terminate the contract.
- Damages: An impacted party may be able to seek damages in certain circumstances, often ordered by the Court. There are a variety of damages that can be awarded for your loss/es depending on the situation, including compensatory, nominal, incidental and liquidated damages.
- Specific performance: Where the breach is either anticipatory or actual, the Court may order specific performance of the contract to be carried out by the breaching party. This often occurs where damages are deemed insufficient.
Where to get help if you are a party to contract that has been breached
The most effective way of protecting your business from being party to a breach of contract is to have a solid written contract in place from the outset. It is crucial that the contract is carefully drafted, in compliance with the relevant laws, and such that any provisions of the contract cannot be held void or unenforceable.
If you need assistance with drafting Business Contracts, or you have been party to a contract that has been breached or is likely to be breached, contact Ivy Law Group’s Commercial Lawyers on (02) 9262 4003 for an obligation-free consultation, or submit an online enquiry.