Texas Business Lawyer

Contracts Center - Breach of Contracts and Lawsuits

Individuals and companies enter into contracts with the expectation that the terms of the contract will be carried out. However, due to a variety of reasons, and often beyond the parties' control, contracts often go unfulfilled. Business owners should understand what to do in case they breach a contract or in case another party breaches a contract with them.

Breach of Contract Defined

After a legally enforceable contract has been created, the parties are legally required to perform their respective duties under the contract. The failure to perform a contractual obligation is called a breach of contract. Common breaches of contract include late performance, defective performance, and failure to perform at all. The law distinguishes material breaches from immaterial breaches. Material breaches are those that deprive a party of an important or substantial part of the benefit due under the contract. Immaterial breaches are those that are technically contractual defaults but that do not prevent the other party from enjoying essentially what he bargained for. A breach of contract is what triggers a cause of action to enforce the contract.

How Contracts are Enforced

If a party breaches a contract, the other party may attempt to enforce the terms of the contract by several means. Parties should always begin by communicating, requesting performance, and possibly negotiating a settlement. If informal discussions are unsuccessful, the parties may need to resort to litigation. The injured party can sue in court for breach of contract to have the breaching party ordered to perform or compensate the injured party for her loss. If the amount in dispute is $5,000 or less (in Texas), the parties can probably have their dispute heard relatively quickly in the small claims or justice court. Another way to avoid traditional court litigations is by taking advantage of one of the methods of alternative dispute resolution, such as arbitration or mediation.

Remedies

Various remedies are available in breach of contract suits, depending on what the injured party suffered as a result of the breach. They include:

• Monetary damages: Monetary damages are the remedy that parties most often seek in breach of contract suits. Damages fall into different categories, each of which may or may not be available depending on the circumstances of a given case.
  • Compensatory damages are the most basic type of damages that are sought. Compensatory damages are awarded to put the injured party in the position in which she would have been but for the breach.
  • Liquidated damages are only available if the parties agree beforehand, usually in a provision in the contract in question, that a specific amount will be owed in case of breach.
  • Nominal damages are an insignificant, token amount, usually one dollar, that is awarded when a party committed a breach but the complaining party cannot prove that any monetary loss was suffered.
  • Punitive damages are an additional amount that is awarded in rare, extraordinary cases to punish and deter very wrongful acts on the part of the breaching party.
• Specific performance: Specific performance means that, rather than ordering payment of money, the court orders the breaching party to perform or refrain from a specific act, such as completing a job, returning property, or refraining from working for a competitor.
• Cancellation and restitution: If a nonbreaching party has already paid or conferred some benefit on the breaching party, she may want to cancel the contract and be reimbursed for what she has lost in order to simply return to her status quo prior to the contract.

Summary

Business owners must understand the consequences of the contracts that they create. They need to know what other parties are obligated to do and how to enforce those obligations, and they need to know what their own duties are. A Texas business lawyer can explain contract obligations and the consequences of breaches of contract, and they can represent businesses in prosecuting or defending breach of contract claims.

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Centrally located in the Arboretum area of north Austin, the Slater & Kennon law firm represents clients in Travis County, Bastrop County, Burnet County, Williamson County, and Hays County, including the cities of Austin, San Marcos, Bastrop, Burnet, and Georgetown.