Types of Contract Breaches Every Business Owner Should Know About

Business owners often enter contracts in hopes of further establishing and benefiting their company. However, even the most responsible companies may experience a breach of contract. While a business might have a comprehensive understanding of the terms of an agreement and take steps to avoid litigation, business disputes can arise with only the slightest misunderstanding. 

A breach of contract occurs when one party does not comply with their contractual obligations, as agreed upon in a legally binding agreement. Breach of contract is a legal cause of action in which those involved may seek commercial litigation to resolve the dispute. For businesses to know what course of legal action to take, they need to be aware of the differences between common contract breaches. Read below to learn more about the most common types of contract breaches and how the Dallas law firm of Ritter Spencer Cheng PLLC can help protect businesses if a breach of contract occurs. 

Actual Breach 

An actual breach of contract is one of the most common failures to meet contractual obligations. When an individual or business fails to respond to their duties by a particular due date or performs them improperly, they become a breaching party.

Because this type of breach is relatively common, financial or material remedies for the wronged party are well known. The outcome of an actual breach of contract may include compensatory damages that address the wronged party’s economic losses stemming from the breach. Another resolution may take the form of consequential damages. Consequential damages are mostly indirect losses that may or may not match the value established in the contract depending on the severity of the breach. An expert commercial litigation attorney can go over the possible resolutions available and share recommendations to make future contracts stronger

Material Breach of Contract 

When one party benefits from its expected service at the other party’s expense, it is known as a material breach of contract. Material breaches affect big corporations, individual consumers, and a range of organizations in between. A material breach can occur in several scenarios. One of the most common ways a material breach occurs is when one party under-delivers to make the agreement more lucrative for themself. 

The wronged party can pursue damages against the breaching party when a material breach of contract occurs. While a material breach of contract is inconvenient, avoiding standard form contracts and limiting vague language at the start of a business transaction can help companies avoid unnecessary confusion. 

Anticipatory Breach of Contract 

An anticipatory breach of contract occurs when one of the parties acknowledges they will be unable to fulfill one or several parts of the contract terms. This realization occurs before the breach, unlike an actual breach, which occurs after the due date. The non-breaching party can pursue damages and terminate the contract before the established date of contract completion. Although action can be taken before the party at fault breaches the contract, an anticipatory breach can still result in the loss of money and resources. Businesses should work with an experienced business lawyer specializing in contracts to ensure they are protected from potential anticipatory breach of contract disputes. 

While breaches of contract can be stressful for any individual or business, an experienced commercial litigation attorney will ensure that your interests are protected. Ritter Spencer Cheng PLLC has a team of trusted attorneys willing to work with you to review your contract, address the conditions of any breach, and go over your options. Our attorneys have successfully handled numerous cases in several practice areas, such as business and corporate law, trademark law, and more. Contact our office today for more information.