Signing a contract means making a firm commitment to another party. A business contract may require the delivery of goods or the performance of certain services. Companies sign contracts to lease commercial space, lock in vendor pricing and clarify expectations for employees.
Contracts are mutually beneficial in scenarios where everyone fulfills their obligations. However, they can become sources of conflict and even operational disruptions in scenarios where people fail to fulfill their contractual responsibilities.
Contract breaches can force business leaders to initiate lawsuits to enforce their agreements with other parties. What types of contract breaches may require legal action to resolve?
1. Nonperformance
Failing to fulfill the terms of a contract is a common source of contract disputes. One party does not deliver goods as outlined in a contract or does not complete a project according to the agreed-upon timeline.
The failure of one party to provide the delivery of goods or certain professional services can negatively affect daily business operations. Contract litigation can result in a refund of any money paid for goods or services not provided or a court order compelling the other party to fulfill contractual obligations.
2. Substandard goods or services
Sometimes, the other party to a contract delivers goods or provides work, but what they provide falls far short of the standards outlined in the contract. Perhaps a construction professional finishes a project with cheap materials instead of the specific materials requested by the client.
Maybe a vendor delivers spoiled produce or low-quality raw materials. In cases where one party tries to cut corners regarding quality, the goods they deliver or the services they provide may constitute a breach of contract.
3. Engaging in prohibited activities
Many contracts include not just requirements for specific actions but also prohibitions on other conduct. For example, the contract may prohibit either party from disclosing the terms of the agreement to outside parties.
A breach of a confidentiality clause integrated into a contract could do real harm to one of the organizations. When there is evidence that either party engaged in actions directly prohibited by the contract, the other party could treat that conduct as a breach of contract.
If the party in breach of the initial agreement does not voluntarily remedy the situation, then it may be necessary to initiate a breach of contract lawsuit. Reviewing the contract and the conduct of the other party can help a business leader hold others accountable for negatively affecting a company’s operations.