When a business contract has been breached, there are some options available to the affected party. The best option hinges on your objectives, whether that’s complete fulfilment of the agreement, financial compensation, or ending the contract. This article will explore what remedies are available in a breach of contract before proceeding to legal action.
When a contract is broken, it is essential to determine what was agreed upon, what transpired differently, and when. Breaches encompass situations like non-payment, late delivery, defective goods or services, or engaging in unauthorised subcontracting. Ensure the facts are clear and the timeline is easily verifiable; it is important to collect evidence of contracts and any variation emails as early as possible.
Before escalating a breach, you should ensure contractual rights and procedures are reviewed. If there are measures already set out in the contract on how to deal with breach, such as notice requirements, termination triggers, or dispute resolution, they must be followed. If you avoid this requirement, you could risk weakening your position or cause a counter claim to be made.
Ways to resolve the breach
One of the most cost-effective options is to pursue a swift commercial settlement. If the breach is salvageable, and both parties want to preserve the business relationship, they can agree a practical remedy, such as revised delivery dates, remedial work, replacement goods or staged payments. Any agreement should be recorded in writing, for example, by way of a variation to avoid misunderstandings and reduce the risk of the same issue recurring.
When negotiations fail, a formal letter is useful in bringing focus. It should set out the facts and explain the breach, the remedy sought, enclose key documents, and give a clear deadline to respond. Without needing to go to court, a precisely worded letter can ensure payment or actions are taken and also highlight your sensible approach.
The most common remedy are damages. The aim is to reimburse you for damages arising from the breach, such as lost profits, extra expenses, or wasted spending, as long as these losses were reasonably predictable. There is an expectation for the affected party to mitigate their losses by taking reasonable steps to reduce the risk, for example, within a contract for the supply of goods, obtaining alternative supplies.
Alternatively, enforcing performance or seeking urgent protection is another route. This option is taken when monetary damages are insufficient and the contract involves unique assets, a time-sensitive obligation, or the safeguarding of confidential information.
When the breach is very serious, you may be entitled to terminate the contract and claim damages. Termination ends future obligations however you may still claim for losses already suffered. It is important to follow termination clauses strictly to avoid allegations of wrongful termination.
Nath Solicitors has over 30 years of legal experience and delivers practical advice on commercial law, contracts, and agreements. If you need assistance, please contact us on 0203 983 8278 or email us at enquiries@nathsolicitors.co.uk.