Breach of Business Contract

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What Is a Business Contract?

Generally speaking, a business contract is a contract that is formed between two business entities, merchants, or persons who have knowledge in the dealing of certain goods. These can be much different between contracts between two ordinary non-business persons or between a business and a consumer. This is because business contracts often involve specialized knowledge of business matters. 

A business contract can cover a wide range of business operations.  Like any contract, business contracts are enforceable by law so long as they contain all the elements of a valid contract (such as offer, acceptance, consideration, signing, etc.). Some business matters that are commonly the subject of a business contract may include:

In some cases, both businesses may be held to somewhat higher standards on account of the expertise involved in the business contract arrangement. 

What Is Breach of Contract in a Business setting?

In a business setting, a breach of contract occurs when one of the parties fails to perform their duties as specified in the contract. This can take many different forms, depending on what the parties have agreed upon in the contract  Some acts that might constitute a breach of business contract include:

A feature of a many lawsuits involving breach of a business contract is the idea of “prior business dealings.” In some cases, a breach of contract can be based on the way that the two businesses had conducted business in the past, or have been conducting business up to the time of breach. These patterns of business interactions are called prior dealings and can serve as the basis for determining what is breach of contract in a business setting.

For example, suppose that Business A had been supplying Business B with 15 inch screws consistently for over 35 years. If all of a sudden Business A starts providing 20 inch screws instead of 15 inch screws, Business A might be found in breach of contract.  This is because the prior business dealings between A and B involved only 15 inch screws and never 20 screws. 

Business A might be held liable even if a written contract did not actually specify the size of screw. In many business deals, the parties may actually not be using a written contract, especially if they have been dealing with each other for many years. The breach would be said to be based on the business’ prior dealings, as one party might be expecting the deals to be the same every year. Thus, when determining what is breach of contract in a business setting, courts may need to conduct an in-depth analysis of how the companies interacted over the years.  

What Are the Remedies for Breach of a Business Contract?

In most cases, a monetary damages award is a suitable remedy for a breach of business contract. This can provide the non-breaching party with compensation for losses such as lost profits, lost business opportunities, or loss of property. However, the damages must be calculable to a reasonable degree of certainty. The damages also depend on whether the breach was minor or material.

Alternatively, a court may issue an equitable remedy such as an injunction. The injunction may order the breaching party to perform their contractual duties. Or, the court may allow the parties to rewrite their contract. Equitable remedies are usually prescribed when the damages are difficult to calculate.

Do I Deed a Business Lawyer?

Determining what is breach of contract in a business setting can be a complex matter.  It may be necessary to hire a lawyer if you are involved in a breach of a business contract. A competent business attorney can represent you in court so that you obtain the proper remedy for your losses. You may also wish to contact an attorney before contract negotiations begin, so they can help you draft and review the business contract terms. 

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Last Modified: 12-29-2015 03:21 PM PST

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