What is a Business Contract?
Contracts between two businesses usually have very different rules than contracts involving a business and a consumer (i.e., seller and buyer) or two individuals. Generally, courts assume that businesses will better understand the law of contracts and apply fewer limitations and protections over how these businesses choose to draft a contract.
A business contract can cover a wide range of business operations and dealings. Like any type of contract, business contracts are legally enforceable if they contain all of the essential elements of a contract, such as offer, acceptance, consideration, and execution.
Common business topics that arise as the subject matter of a business contract may include:
- Shipment and delivery of goods;
- Performance of services by a vendor or independent contractor;
- Construction of a commercial structure or building;
- The sale, purchase, or transfer of a business;
- Short-term joint business deals; and
- Long-term agreements.
What is a Breach of Business Contract?
A breach of a business contract occurs when one of the parties to the contract fails to perform their duties as required under the contract. The severity of the breach depends on what the parties agreed to, contract terms and the financial stakes involved.
Common examples of breach of a business contract include:
- Failure to perform a service;
- Failure to pay for goods;
- Failure to deliver goods;
- Delivery of the wrong goods;
- Untimely or late delivery of goods;
- Delivery of damaged goods;
- Failing to surrender business property after the transfer or sale of a business; and
- Violating confidential business information and trade secrets.
A breach of contract can be based on the prior business dealings and how the two businesses have conducted business in the past or conducted business before the breach.
Prior business dealings can be used to determine a breach of contract in certain business scenarios.
- For example, Business 1 had a contract to supply Business 2 with rods for over 20 years. But after 15 years, Business 1 switches metal rods for plastic rods without Business 2’s approval. In this scenario, Business 1 might be in breach of their contract.
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- The prior business dealings between Business 1 and 2 involved metal not plastic rods. Business 1’s conduct can be a breach of contract. Business 1 could be liable even if there is written contract that did not specify the materials of the rods.
Though most business insist on written contracts, sometimes agreements are made without a written contract, especially if the parties have been dealing with each other for many years. If that is the case, a breach will be based on the businesses’ prior dealings and the verbal agreements of the businesses. These prior dealings will likely by critical to a Court reviewing the conduct of the businesses with each other over the years.
Can I Sue for Breach of Business Contract?
When a breach of contract occurs, one or both businesses to a contact may wish to have the contract enforced or recoup financial harm caused by the breach.
In the normal course, if a business believes a breach of contract has occurred, informal means to resolve the dispute are used before a formal lawsuit is filed. However, often it is necessary to file a lawsuit to resolve a breach of contract dispute between businesses. Alternatively, the disputing businesses can agree to mediate their dispute or submit to binding arbitration. This is commonly referred to as alternative dispute resolution.
What are the Remedies for a Breach of a Business Contract?
The remedies available in a breach of business contract depend on the type of breach and severity of breach. There are two types of beaches, minor and material. A minor breach of contract, also referred to as a partial breach, occurs when one party to a contract has performed most of its essential obligations under a contract, but fails to perform a minor condition or term of the agreement. This type of breach usually does not have a significant financial impact. Under these circumstances, the non-breaching business may be entitled to compensatory money damages to make up for the loss. These losses must be proven through evidence the court can review and rely on. The parties to a minor breach normally will continue to operate under the existing contract.
On the other end is a material breach, which is a serious breach of a contract. Where there is a material breach, meeting the terms of the contract typically become out of reach to the parties. Under these circumstances, the court will look at the impact of the breach and may enforce an equitable remedy. An equitable remedy is a requirement to do something or stop doing something as opposed to compensatory damages, which is money. Court will normally only apply equitable remedies when compensatory damages are inadequate to cure the breach and protect the interest of the non-breaching business.
Examples of equitable remedies include:
- Injunctive Relief- This means forcing a party to act in a specific way or forbids them from engaging in certain activities.
- Specific Performance- This means a party is ordered to perform a certain duty under the contract.
- Recission of a Contract- This means undoing a contract, rendering it null and void. This remedy is reserved for only the rarest of circumstances where, for example, fraud or a material misrepresentation occurs.
- Reformation of a Contract- This means that a contract is modified in part to match up to what the parties to a really intended under a contract or to undo an unfair or oppressive clause in a contract.
In terms of compensatory damages, there are three main types:
- General Damages, which is compensation for actual losses;
- Special Damages, which compensates indirect losses; and
- Liquidated Damages.
Defenses Are Available in a Breach of Business Contract Case?
Where a party to contract has been sued for breach of contract, there several defenses that may be raised, which include the following:
- The plaintiff failed to perform under the contract and therefore failed to meet a condition before having the right to bring the lawsuit.
- Inadequate notice of default from the plaintiff.
- The plaintiff breached the contract first, which thereafter relieved the defendant from further obligations under the contract.
- The contract is impossible to perform.
- The purpose of the contract is frustrated.
- The plaintiff is limited to the terms of the contract and can’t ask the defendant to do something outside those terms.
- A breach of the implied covenant of good faith, reasonableness, and fair dealing.
- There is a lack of consideration.
Do I Need to Hire a Business Lawyer?
Under Florida law, a business cannot represent itself (i.e. pro se) and must be represented in court by an attorney. Also, the law regarding business contract disputes is very complex and constantly evolving and changing.
It’s a good business practice to consult with qualified and experienced business or commercial litigation lawyers, such as Law Office of Ryan S. Shipp, PLLC when you believe there has been a breach of a business contract, or your business is alleged to have breached a contract. Our business lawyers will assist you in navigating the complexities of a business contract breach dispute, protect your businesses rights, stop harassment, give you guidance as to the risks and rewards of future actions, and represent you in court. Call us today @ 561.699.0399 to learn more.
Links to our Florida Legal Business Blogs
- What to Expect in your Initial Consultation with an Attorney
- Drafting a Foolproof Settlement Agreement (Florida) | 561.699.0399
- Florida Breach of Contract
- West Palm Beach Business Attorneys
- Choosing the Right Structure for your Florida Small Business
- Florida Commercial Properties Offer Investors Benefits
- Lake Worth Commercial Leases and Protecting the Interests of your Business
- West Palm Beach Non-Compete Agreement
- West Palm Beach Florida Commercial Leasing Agreement
- Lantana Florida Lawyers
- West Palm Beach Business Lawyers
- Florida Contract Lawyers
