Top 10 Reasons To Avoid Breaching a Contract

A contract is an agreement between two or more parties that legally requires the parties to perform or not perform certain acts. This is a fundamental concept in business law. A material breach of contract or even a minor breach occurs when one of the parties performs in a way that is contrary to the contract.

When a breach occurs, the parties may want to have the contract enforced or may try to recover money for the financial harm caused by the actual breach. Contract disputes such as breach of contract can hurt your business in more ways than simply financial loss.

The following is a list of the top 10 reasons to avoid breaching a contract.

10. Your Business Reputation

Breaching a contract could damage the reputation of both your business and yourself, as a small business owner, in the business community.

9. Your Business Relationships

Not following through with contractual obligations, or acting in a manner that goes against a contract, can lead your business partner or the other party to want no longer to do business with you.

8. Lawsuits

A breach of contract can lead to legal action against your business.

7. Time Away From Your Business

If sued, you could be forced to spend valuable time away from your business in order to respond to discovery requests, attend depositions, and litigate the matter in court.

6. Legal Fees

Whether your breach leads to a lawsuit, arbitration, or mediation, you could incur significant legal fees while trying to defend your business.

5. Specific Performance

Depending on the type of contract, such as a real estate or written contract, you could be ordered by the court to perform the obligations required by the terms of the contract.

4. Contempt

If the court issues an order and you don't obey it, you could be held in contempt, fined, and/or imprisoned.

3. Compensatory Damages

You could be forced to pay compensatory damages, which is the most common remedy for a breach of contract case. The money damages are usually in the amount that puts the non-breaching party in the position that the party would have been had the breach not occurred.

2. Punitive Damages

Although rare in contract cases, you could be ordered by the court to pay punitive damages, which can be a significant amount of money.

1. You Lose All the Way Around

You could spend much more money, time, and mental and physical energy resolving the breach of contract than you would have spent performing your obligations under the contract.

Getting Legal Help

One of the best ways to avoid contract issues is to consult with an attorney while drafting a contract. If you have already entered into a contract, you may want to contact an attorney before taking any action that could lead to business litigation. If you have any questions about business transactions, how to avoid breaching a contract, or contract law, contact an experienced attorney in your area who specializes in these practice areas.

For more information related to this topic, you can visit FindLaw's section on Business Contracts and Forms.