What To Do After the Other Party Breached Your Contract

Many of us have been in a business relationship that has not worked out as planned. The other party may not have done what was promised, or is not responsive to your calls and concerns, or is causing considerable anxiety or financial loss, or all of the above.

Of course, it is frustrating when the other party has not delivered as promised. But it is important to first determine whether a breach has been committed, and whether the breach is material:

A breach of contract falls into one of two categories:

  • Non-Material Breach: Involves an ancillary or minor contract detail. For example, if you are a clothing designer and the packages of dress silk that you ordered for July 5 arrive on July 6. That is a non-material breach because the one-day delay is a minor deviation that does not go to the heart of the contract.
  • Material Breach: Affects the nature of the contract itself and is much more serious. For example, if you tell your fabric supplier that you MUST have the dress silk no later than July 5 because a wedding has been scheduled for July 8 and you need two full days to make the dresses, the delay could be considered a material breach because the time of the delivery was essential to the contract.

In considering whether a material breach of contract has occurred, you must ask:

  • Were you denied benefits under the contract that you reasonably expected?
  • How does the other party’s actions comport with good faith and fair business practices?
  • Was the breach under their control or due to outside influences?

Most contracts include a section detailing the steps to follow in the event of a breach. Depending on your particular contract, you may be required to make an informal request for mediation before commencing legal action. If you are dealing with a non-material breach, you must continue to perform your own responsibilities under the contract; if you fail to honor your obligations you are the one who could end up liable for damages. If the breach is material, you may be excused from performing your obligations.

If you have a question about a contract in which you are involved, or a question on any other business matter, give us a call at 707-733-4946.