What Business Owners Need to Know About Breach of Contract
When you run a business, you rely on contracts to formalize agreements with vendors, clients, partners, and employees. These documents form the foundation of your professional relationships. But what happens when another party fails to hold up their end of the bargain?
If you're a business owner, working with an experienced attorney who can help you understand your rights in a contract dispute is the first step toward resolving them.
The Parzivand Law Firm, PLLC helps business owners address these exact situations. With a unique background in human resources, Attorney Parzivand brings a people-focused perspective to legal disputes, making him an approachable and effective advocate. The firm serves Texas individuals and businesses in Stafford, Sugar Land, Fort Bend County.
Understanding the Basics of a Contract
Before you can identify a breach, you must first confirm that a valid contract exists. A contract is a legally enforceable agreement between two or more parties. While many people think of long, formal documents, contracts can take various forms. However, to be legally binding, an agreement generally must contain four key elements:
Offer: One party proposes specific terms to another. For example, a supplier offers to deliver 500 units of a product for a set price.
Acceptance: The other party agrees to the terms of the offer without changes. If they propose different terms, it is considered a counteroffer, not an acceptance.
Consideration: This is the value that each party exchanges. It can be money, goods, services, or a promise to do or not do something. For a contract to be valid, both sides must provide something of value.
Mutual intent: All parties must intend to be bound by the agreement and understand their contractual obligations.
A contract does not always need to be in writing to be enforceable. Oral agreements can be binding in many situations. However, they types of agreements are often harder to prove in court. Certain types of contracts must be in writing under the Statute of Frauds.
What Constitutes a Breach of Contract?
A breach of contract happens when one party fails to fulfill their obligations as outlined in the agreement without a valid legal excuse. This failure can manifest in several ways, ranging from completely ignoring the terms to failing to perform on time. In business, this could take the form of a vendor failing to deliver goods, a client refusing to pay an invoice, or a service provider not completing a project as specified.
When a breach occurs, it is important to determine its severity, as this will influence the available remedies. Breaches are generally categorized into two main types: material and minor.
Material Breach
A material breach is a significant failure to perform that undermines the core purpose of the contract. It deprives the non-breaching party of the benefit they were supposed to receive. For instance, if you hire a company to build a website for your business and they fail to deliver it, that constitutes a material breach.
The failure is so substantial that it voids the entire point of the agreement. In this case, the non-breaching party is excused from their own obligations and can immediately sue for damages.
Minor Breach
A minor, or partial, breach is less severe. It occurs when a party fails to perform a part of the contract, but the failure does not defeat the contract's primary purpose. For example, if a supplier delivers goods one day late but you can still use them for their intended purpose, this might be considered a minor breach.
The non-breaching party must still fulfill their own obligations under the contract, such as paying for the goods, but they can sue for any damages caused by the delay.
Breach of Contract Laws in Texas
In Texas, breach of contract claims are governed by state statutes and common law. The Texas Civil Practice and Remedies Code specifies many of the legal procedures and potential remedies available to businesses. To succeed in a breach of contract lawsuit in a Texas court, the plaintiff (the party filing the suit) must prove four elements:
The existence of a valid contract: You must show that a legally enforceable agreement was in place.
The plaintiff performed or tendered performance: You must demonstrate that you fulfilled your end of the deal or were ready, willing, and able to do so.
The defendant breached the contract: You must provide evidence that the other party failed to meet their obligations.
The plaintiff suffered damages as a result of the breach: You must show that the breach caused you a quantifiable financial loss.
Texas law also sets a time limit for filing a breach of contract lawsuit, known as the statute of limitations. For most written and oral contracts, you have four years from the date the breach occurred to file a claim. If you wait longer than four years, a court will likely dismiss your case.
Remedies for a Breach of Contract
When a breach occurs, the non-breaching party may be entitled to certain remedies. The goal of these remedies is usually to put the injured party in the position they would have been in had the contract been performed correctly.
Damages: This is the most common remedy. The court orders the breaching party to pay money to compensate for the financial losses caused by the breach. This can include direct losses (compensatory damages) as well as foreseeable indirect losses (consequential damages).
Specific performance: In rare cases, a court may order the breaching party to perform their contractual duties. This remedy is typically reserved for situations where monetary damages are inadequate, such as in contracts involving unique goods like real estate or one-of-a-kind art.
Rescission and restitution: This remedy essentially cancels the contract. Both parties are returned to the position they were in before the agreement was made. Any money or property exchanged is returned (restitution). This is often used when a contract is based on fraud or a mistake.
Steps to Take When a Breach Occurs
Acting quickly and methodically can help protect your position in the event of a breach of contract. First, review the contract carefully. Understand the specific terms and obligations that were not met. Gather all related documents, including emails, invoices, and other correspondence that can serve as evidence.
Next, try to communicate with the other party. Sometimes, a breach is the result of a misunderstanding that can be resolved through direct conversation. A formal written notice of the breach can also be effective, outlining the specific failure and requesting a remedy.
If informal communication fails, it may be time to seek legal assistance. A business law attorney can help you understand your options, negotiate on your behalf, and, if necessary, represent you in litigation.
Breach of Contract Attorney Serving Stafford, Texas
The Parzivand Law Firm, PLLC, focuses on building strong client relationships and guiding business owners through legal challenges. Attorney Parzivand offers more than just legal services; he takes pleasure in connecting with clients to understand their unique situations.
His background in human resources makes him a clear and approachable communicator, whether you prefer to meet in person, talk on the phone, or correspond via email. His goal is to provide cost-effective solutions designed for your specific needs, with support at every step. For help with breach of contract cases in Stafford, Sugar Land, and Fort Bend County, Texas, call The Parzivand Law Firm, PLLC today.