Breach of Contract

Contracts are a part of life.  Unfortunately, the days of the handshake deal are dead and gone.  Still, for most folks, when you enter contracts, you intend to keep your side of that contract… and you surely expect the other side to keep its end of that promise.  However, for many reasons (usually money), one or both sides need to break the contract.  Now, when it is someone else breaking the contract you intend to uphold, that’s a problem.  However, a part that no one ever really considers is what to do when they need to break a contract.  Here’s the good part about contracts – no punitive damages.  However, the bad part is that damages are a part… and that part can get tricky.  The other tricky part is that even the written word is not always what it seems.  Largely due to lawyers’ obsession with bending logic, contract law has taken some pretty wild twists and turns that aren’t necessarily apparent.

Let’s start with what to do if the other party is breaking your contract…

So, you signed and the deal worked for both sides.  Now, six months down the line, the other side wants to stop paying or stop providing some service.  What can you do?  Always, always, always, step one is to look to the contract.  Now, some contracts are easier to understand than others, but you want to look to see if there are termination provisions.  You want to know whether there is a dictated procedure to break the contract and whether it is being followed.  You also want to see if there is some kind of buy-out or “liquidated damages” clause by which you get money.  If there is, perhaps the first step is to open a line of communication – essentially see if you can work it out without lawyers and courts.  If you can, great!  If you can’t, however, or if you can’t decipher through the legalese what your rights are under the contract, see a contract litigation lawyer. It may or may not cost a few bucks to have your contract reviewed, but the information can be invaluable.  From there, a contract litigation lawyer can explain what rights you have under the contract and can start providing you with your options and potential strengths/weaknesses and potential damages for any claims you may have for a breach of contract.  Additionally, your contract litigation attorney should be able to provide you with essential steps and a timeline for your options.

So, what if you want to break your contract?

The first we’ll tell you is to do your homework.  Essentially, take the above and flip it – except this time, you are afforded the ability of being proactive.  As part of that homework, seek the counsel of an attorney so that he or she can fully explain your legal consequences.  This is not the time for self-help.  With that, run the numbers.  And to do this accurately, you need to know your contract.  Again, there should be some termination clauses.  Take a look and see what it says.  Is there a damages clause?  What are the notice requirements?  You will need to follow these.  If there is a damages clause then you are able to predict what you’re going to spend to get out.  You need to know your return on investment.  What benefits are you getting from this contract?  Then look at what you’re going to pay versus what you will get out of breaking the contract.   If it is for a new vendor, make sure you’ve done your homework so you know that you aren’t just getting a better price, but that you are going to get the proper quality of product and service.  In other words, you need to understand the totality of costs, risks, and benefits.

So, whether you are the breaker or the break-ee, if a breach of contract is looming, it is time to consult an attorney.  For a free consultation, contact Carpenter Gandhi.