Contracts are the bedrock of business. They allow businesses to exchange goods and services. Contracts lay out reciprocal obligations, rules that govern the relationship, and timelines. Contracts, in short, are the lifeblood of business. Therefore, when a business breaches a contract, companies need methods with which to resolve the dispute. This post will go over the basics of what constitutes a breach of contract.

In a perfect world, everyone would enforce their contracts all the time. But, it isn’t a perfect world. Sometimes people breach contracts because they did not understand the terms of the agreement, because the terms were unfair, or because external reasons mean that the contract is no longer profitable for them. Regardless of the cause, the result is a breach of contract.

A breach of contract occurs when one party to a contract refuses or is unable to fulfill its obligations under the contract. The contract creates a legally enforceable right which is enforceable if a breach should occur. Common breaches are failure to delivery on time and failure to deliver the correct goods.

But, just because a breach occurs, does not mean that you can sue over it. To sue, the breach must be “material.” A material breach results when the breach undermines an essential part of the contract. For instance, assuming the delivery is not time sensitive, missing delivery by a few hours or a day probably is immaterial because when the goods are received does not matter, so long as the goods are received at some point.

If your business is going through a contract dispute with a business partner, you may want to contact a lawyer. You don’t need an attorney barging into careful negotiations however it is important to retain a lawyer in case negotiations break down. A lawyer can ensure that your business is covering its bases and that it is ready in case litigation is necessary. In short, attorneys are your insurance policy against potential future losses.