Every day, there are negotiations that result in business contracts being formed and subsequent actions wheresuch contracts are breached. If you encounter the latter situation, what should you do and what legal rights do you have?
Most entrepreneurs and businesses have a reasonable expectation that the other partyengaged in a business contract will fulfill its contractual obligations.Unfortunately, this does not always happen.
What Exactly is a Breach of Contract?
A breach of contract occurs when one or more parties to a contract fails to fulfill a specific aspect of the contractual agreement. For example, if the contract states that Business X is to deliver a set amount of materials to Business Y on a specific date, but fails to do so, a breach of contract has taken place.
A breach of contract can occur in a variety of circumstances and it is important to understand that the parties who have voluntarily entered into a contractual arrangement are legally bound to fulfill the requirements of the contract, even if they failed to read each provisions of the contract. Failure to review the contract or a certain provision is not a viable defense.
A breach of contract can take different forms as well. Here are some common examples:
- Material Breach
- Non-Material (a.k.a. Minor) Breach
- Anticipatory Breach
A effectively goes to the core of the contract.It impacts the purpose of the contractual arrangement to the point where a breach would effectively undermine the formation of the contract in the first place.In contrast, a non-material breach of a contract is a failure to perform a peripheral provision of the contract. Even though a breach has occurred, the overriding purpose of the contract remains intact.
For example, if you entered into a contract to have an office built for your new business, a material breach would involve the contractor failing to build the office. A non-material breach could involve the contractor building the office, but failing to paint a portion of the office space the correct shade of color.
An occurs when a party refusesto perform a specific aspect of the contract, even if the performance is not scheduled to occur until a later date in the future. In other words, if the other party has made it known that they will not, or cannot, meet their future obligations, then you may be able to take legal action due to an anticipatory breach of contract.
Notwithstanding the breach of contract by the other party, many of your potential rights will be governed by most people deem as “boiler plate” provisions, which include what states laws govern, choice of venue, whether prevailing party can recover attorneys’ fees, whether there’s mandatory arbitration, whether the contract can be assigned without the other party’s consent, whether there is an integration clause (prohibiting a party from claiming promises outside of the contract). Accordingly, it is of utmost important to review and negotiate the entire agreement and not just the provisions covering the business terms.
Have Questions? Contact an Experienced Business Contract Lawyer in Los Angeles
If you are in need of professional counsel on whether it is in your best interest to take legal action against an individual or business in which you have entered into a contractual arrangement, the Hakim Law Group is here to help.Our law firm represents a wide range of entrepreneurs, operating companies, venture capital firms, and financiers in numerous sectors of the economy. We possess the experience, knowledge and professionalism to help our clients attain the best possible outcome. To schedule a consultation or for further information please contact HLG at (310) 993-2203 or visit www.HakimLawGroup.com to learn more.