Contracts are important to any business as they protect you from risk and help all the parties involved understand their rights and obligations. A breach of contract is a type of civil wrong in which one of the parties fails to fulfill its contractual obligations. Financial constraints, issues within their business operations, and technological failures could cause the other party to breach their contract. You might be wondering what would be the best action to take after a breach of contract. Keep reading this article to learn the immediate steps to take when a breach of contract happens.
Consider alternative dispute resolution
If the other party has caused significant damages to you or your business, we recommend looking into alternative dispute resolution. Methods involved in ADR include mediation and arbitration. In arbitration, both parties present their grievances to a solo arbitrator or a panel, making a ruling and deciding on the best course of action.
Rework the terms of the contract
The other party could have made an innocent mistake or failed to understand the contract’s requirements. In this case, litigation might not be necessary, and a simple sit-down could prove to be more profitable for both parties. Figure out a genuine need to revise the contract and make necessary amendments to prevent future misunderstanding.
Terminate the terms of the contract
Termination might be necessary, especially after the offending party fails to adhere to an essential term of the contract. According to a top Edmonton commercial lawyer, you are entitled to terminate the agreement after a breach of contract. Unfortunately, not every breach will give you the right to terminate the contract. If you decide to terminate the agreement, ensure you are compliant with the termination clause and consult a contract lawyer to guide you along the way.
Avoid litigation unless necessary
In extreme cases, a breach of contract will warrant extreme punishment. However, it would be best to assess your current situation and determine whether you can resolve the issue without costly litigation. You could look into the damages the other party incurred when they breached the contract and have them make up for your losses instead of taking legal action.
Recover your losses in court
If the offending party has left you out-of-pocket and refuses to pay for damages to your business, it would be best to take matters to court. Ensure you compare the cost of litigation to the total damages and be keen not to let too much time pass since the occurrence of the breach. If you have enforced the terms of your contract appropriately in the past and have little or no record of breaches, there is a high chance that the court will enforce this breach.
Suing the other party is not always the ideal option when faced with a breach of contract. A lawsuit should be a last resort after you feel you cannot iron out your differences. Ensure you terminate your contract according to the relevant contractual terms to prevent any additional problems in the future. We hope this article has been helpful.