A Quick Explanation of Breach of Contract Procedures

In an idealistic situation, everything would go according to plan. If you laid out a contract for your business, firm, or dealership, it would be followed perfectly and there would never be any issues. However, life does not always go according to plan, and sometimes contracts are broken.

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If one party fails to fulfil any of the obligations stated within a contract, then that contract has been breached and legal action must be taken. Sometimes, one party will try and enforce that the other party follows the terms stated. Other times, they will ask the other party to compensate for any financial harm caused by the breach. If a dispute arises about how the breach should be handled, a lawsuit usually follows.

Most commonly, payment for damages is the most common solution after a breach of contract occurs. The party who commited the breach may be asked to pay compensatory damages, which just include compensation up that will restore the non-breaching party to the position it would have been if the breach had not occurred, or punitive damages, which involves additional compensation from the breaching party beyond what would have been given as compensatory damages as punishment to the breaching party. Nominal damages, awarded when no monetary loss to the non-breaching party can be proven, and liquidated damages, specifically stated in the contract itself, may also occur.

If compensation for damages is not considered to be an adequate remedy to a breach, then the non-breaching party may also request a specific performance, or a court-ordered performance of duty from the breaching party.

In some cases, the contract could also undergo a cancellation or restitution. In these instances, the contract is either voided completely, or returned to refreshed and both parties return to their positions prior to the breach.