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What to Do When the Other Party Breaches the Contract

Contracts are an essential part of doing business, and they can be used when businesses enter into all types of transactions and relationships, whether they involve two or more businesses, construction or licensing, or employers and employees. Regardless of the parties involved, contracts serve two primary functions:
  • Establish the responsibilities and expectations of parties engaging in a business relationship; and
  • Allow for enforcement and legal remedy when breached.

Because few things in life can be predicted, contracts are vital legal measures businesses and individuals can utilize to protect their rights and interests when things don’t go as planned. Whether or not you have the right to take legal action when another party breaches their contractual obligations as outlined depends a great deal on the individual facts and circumstances involved, as well as the nature of your contract and its terms. Generally, however, there are a few key steps to take.

Know What Type of Contract Breach Your Case Involves

Because there are a range of contracts and business relationships, there are several distinct types of contract breaches. These include:

  • Material / Fundamental Breach – A material breach is one where a party fails to fulfil essential terms fundamental to the satisfactory completion of the contract. While it may mean that the contract cannot be completed, there are cases where a material breach can occur even if products or services are provided. Whether or not a material breach occurred depends on the individual facts of a case, and factors such as what work has already been performed, whether it arose from negligence, honest mistakes, or intentional acts, and how the non-breaching party was deprived of reasonably expected benefits.
  • Non-Material Breach – A non-material breach, or partial breach, involves a party that fails to uphold an obligation that is not absolutely fundamental to the contract’s satisfactory completion. Generally, this means failure to perform a non-essential obligation, even in the case where the specified services or products are ultimately delivered. For example, completing the terms of a contract a day after it was requested (in the absence of specified deadlines) would be a minor breach.
  • Anticipatory Breach – When it becomes clear the other party will not meet contractual obligations, it may be considered an anticipatory breach.

Know What Options You Have

Depending on the nature of a contract breach, you may have options for taking action. Examples include:

  • Material – When one party commits a material breach of contract, the other may have the right to sue for damages, an injunction (which stops the other from continuing the breach), or court orders for required completion, depending on the circumstances. They may also choose to restructure the contract, if they wish to maintain an ongoing relationship with the breaching party.
  • Non-Material – Non-material breaches can be grounds for a non-breaching party’s claim for damages, if actual damages can be shown. They may not necessarily prevent or excuse performance and completion of the contract.
  • Anticipatory – In the case of an anticipatory breach, the non-breaching party may have the right to terminate the contract and bring a claim against the breaching party for damages.

Evaluate the Validity of Your Claim

Aside from non-material and anticipatory breaches, most cases involving contract breaches and litigation concern material breaches. In order to determine what rights and options you have as a non-breaching party, the validity of your claim must be evaluated. This includes assessing the validity of the contract itself, determining whether the plaintiff fulfilled your stipulated obligations, evaluating whether the breach was material in nature (i.e. a fundamental part of the contract), and whether the non-breaching party suffered actual damages, monetary or non-monetary. All of these conditions must be met in order to have a valid breach of contract case.

Take Steps to Protect Your Rights

When another party breaches its contractual obligations, the actions of a non-breaching party are essential to their breach of contract case. While these cases will vary in specifics depending on the issues involved, there are some general steps to take during or after the fact:

  • Performance – Because contracts obligate one or both parties to perform, protecting your rights should consist of documenting how you are complying with contractual obligations, or how the other party is failing to perform on their contractual duties. Evidence of underperformance provided by documentation can be critical in any future breach of contract claim.
  • Evidence – In terms of the evidence you collect when another party breaches its contractual obligations, you must remember that it should always be truthful and appropriately preserved. Evidence is vital in breach of contract claims and any litigation, and will be used to show how the other side did not perform. This can take the form of correspondence between parties, dates and photos of uncompleted projects, and other forms of evidence applicable to a particular contract and circumstances.
  • Identify witnesses – Maximizing your chances of prevailing in a breach of contract claim can come through the use of witnesses who have seen or experienced first-hand facts relevant to the other party’s contractual breach. Such witnesses may include those with direct or indirect involvement or experts in a given industry or profession. Regardless of who witnesses are, they should also be evaluated for their credibility.
  • Timely file suit – In Texas, the statute of limitations to bring a breach of contract claim is 4 years from the date a contract was breach or the date from which you knew or should have known about the other party’s breach. Should the statute of limitations run out, claims will no longer be valid.

Seek Available Damages

Ultimately, non-breaching parties should take the most appropriate steps toward resolving a breach. While this may mean negotiating a resolutions out of court, it can also mean litigation. Litigating breach of contract cases is a fact-specific matter, and requires a personalized evaluation of available and appropriate damages. When damages are available, they may include:

  • Actual damages
  • Reliance damages
  • Restitution damages
  • Quantum meruit
  • Liquidated damages
  • Specific performance

You can find more information about available damages and winning a breach of contract case on our blog.

Comprehensive Representation in Your Breach of Contract Case

Our Houston business law attorneys at Hendershot, Cannon & Hisey, P.C. draw from over 130 years of collective experience when protecting the rights of business clients who must bring or defend themselves against breach of contract claims involving all types of issues and disputes, including those involving:

By working with our proven attorneys, businesses and individuals throughout all industries can ensure they take the right steps when another party has breached their contract. If you have questions about breach of contract cases in Texas and how our firm can help you take the next steps, call (713) 909-7323 or contact us online to request an initial consultation.

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