For Arizona businesses, contracts form the framework upon which a business operates, whether it is between partners and shareholders, contractors and subs, for purchase or sale, or for employment or service. The network of contracts between entities holds relationships together and protects the interests of all parties.
When an event causes operations to stall, creating delays, or results in finance and performance issues, however, disputes can arise between parties that will result in a breach of contract lawsuit. Breaching the contract occurs when one party fails to perform obligations in accordance with the terms of the contract.
Material or immaterial breach
Depending on the type of breach, the choice of legal action will differ. An immaterial breach is a minor or partial breach in which the injured party may sue for damages but cannot end the agreement.
In a material breach, however, the failure to perform under the terms of the agreement is so severe that it voids the contract. Also called a total breach, this injury will provide the framework for awarding damages to the injured party and will include an excuse from future performance under contract.
Remedies for a breach of contract
If the parties attempt informal measures and are unable to resolve the dispute, a lawsuit usually follows. In determining the gravity of the breach, the court will consider:
- the extent of performance by the breaching party and the benefit the injured party has already received from the contract
- whether the breach was intentional or not
- if there is an expectation of future performance by the breaching party
- the extent of compensation available
- the burden to the breaching party if the verdict is a material breach
Depending on the type of breach, the remedies available to the plaintiff may include damages that are compensatory, liquidated or punitive, specific performance by the breaching party according to the terms of the contract, or cancellation and restitution of the contract.
For Phoenix-area business owners, it is essential to understand what legal options are available to them when a dispute arises, so that they may protect their interests and enforce their legal rights.