Most people don’t enter into contracts with the intention of breaking them, however, it still happens with remarkable frequency. Just four in ten small businesses will still be trading after five years. It’s definitely worth knowing what to do when a breach happens so you can avoid being one of the other six.
So, what SHOULD you do when a breach occurs? Below we lay out the steps you should take if a contractor doesn’t fulfill an obligation:
Verify A Breach Of Contract Actually Occurred:
For a breach of contract to occur 3 elements need to be met:
- One party does not fulfill its obligation or their actions show their intention to fail to carry out their duties – non-payment, someone designs your website by the agreed deadline but with some mistakes.
- You suffer a loss because of the breach.
- The breach is the responsibility of the person you are challenging.
Check Your Contract Content:
Before taking any action, you should look at your contract, there may be specifically prescribed remedies for particular types of breach..
The most common remedies are:
- Liquidated damages: an amount specified in the contract you receive.
- Compensatory damages: the party reimburse you in money for your losses.
- Specific performance: the court order both of you to follow through the original agreement.
- Rescission: the contract is cancelled and any money is return as if nothing happened.
The content of your contract, and especially your termination clause, states which legal avenues you might pursue. Aside from taking your grievance to court –
You must not forget your duty to mitigate loss. What does this mean? You need to do everything reasonably possible to minimise the potential loss , you should not make the situation worse.
Send Your Breach Of Contract Letter:
This letter has two goals:
- It enables you to set up your claim
- It might enable you and your contracting party to get everything back on track.
What you should include in your breach of contract letter:
- You should detail your contract, how it has been breach and what your losses are.
- You should ask your contractor to remedy the breach within a reasonable timeframe – 14 days is the minimum timeframe.
- If you want to charge interest you must specify the interest rate.
- You should specify the further legal action that will be taken.
Such a letter should be sent in a way that allows you to get a confirmation of receipt. This way it will constitute proof that you have informed the party at fault.
Thus, if a breach occurs check your contract content regarding remedies and legal proceedings, do not make the situation worse (if anything, try and improve it) and send a breach of contract letter. Then, if nothing changes, pursue legal proceedings.
I hope this helps! If you’re unsure about the legal advice that you or your startup require, we offer a Free Legal Session. We’ll talk you through your needs and answer the questions you may have. Book a session here.