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What Happens When a Contract Fails?

In the United States, people enter into contracts under the implied covenant of good faith and fair dealing. This means all parties that sign a contract agree to keep their word and treat one another with respect — without using trickery or unfair tactics to avoid their contractual obligations.

Sadly, not all contracts go according to plan. Sometimes, legitimate obstacles, such as delays and financial difficulties, prevent one or more parties from fulfilling their end of the contract, and other times, parties simply fail to uphold their end of the bargain. When the terms of a contract are not met, the parties can negotiate a solution, but if one or more parties is not cooperative, a breach of contract lawsuit may be in order.

When Is a Breach of Contract Lawsuit Necessary?

Breach of contract lawsuits become necessary when one party fails to uphold their end of an agreement, and another party suffers harm as a result. In many situations, the party that violates the contract will try to mitigate this harm and quell the need for a lawsuit, but sometimes, lawyers may need to get involved.

For example, consider a contract between a raw materials supplier and a company that makes shoes. If the shoe company pays for materials, the supplier must deliver according to the terms of the contract. Perhaps a giant cargo ship gets stuck in the Suez Canal and delays the shipment, causing it to arrive several days after the date agreed upon in the contract. Now, the shoe company cannot make its shoes and misses out on a big order.

If the supplier acts in good faith, they will deliver the goods and use insurance or another means to compensate the shoemaker for its losses. If the supplier fails to act in good faith, however, they may deliver the goods late without so much as an apology.

Because the supplier failed to fulfill the contract, and the shoe company lost money as a result, the shoemaker might need to file a breach of contract lawsuit against the supplier — if the supplier acts in bad faith. During the lawsuit, the shoemaker will become the plaintiff and ask the court for restitution in the form of damages. If the shoe company’s case is successful, the supplier (the defendant) will have to compensate the shoemaker for its losses and may face punitive damages, as well.

What Contracts Can Be Breached?

Almost any contract can be breached. Employers and employees can enter into contracts, buyers and sellers can enter into contracts, and businesses can make agreements to work together. Similarly, one party can agree to behave in a certain way to gain access to information, and certain contracts protect intellectual property.

If someone enters into a contract, fails to uphold it, causes damages, and fails to act in good faith, this behavior or lack of action can constitute a breach of contract. At our firm, we help people with contract disputes involving:

  • Employment agreements
  • Buy-sell agreements
  • Non-compete agreements
  • Non-disclosure agreements
  • Intellectual property disputes
  • Business disputes
  • And more

Not every breach of contract is malicious, nor does every breach of contract require legal action. Some situations involve genuine misunderstandings, and others involve honest mistakes.

In many cases, lawyers can help their clients resolve breaches outside of court by clarifying misunderstandings or offering apologies and corrective action. When both parties disagree about what happened or do not interpret their contract the same way, attorneys may need to bring the issue to court and let the judge and jury decide.

No matter your situation, revisiting the contract in question with an attorney can be extremely helpful.

At Dan Robinson Law, P.C., we offer free initial consultations to discuss your rights and legal options, and we can help you take a contract dispute to court if necessary.

Whether you’ve been harmed by a breached contract or received a baseless claim against you, call us at (805) 322-7200 or contact us online to start protecting your best interests today.