Breach-of-contract disputes can lead to potentially costly commercial litigation in Michigan. Knowing what causes a contract dispute and how to handle a breach-of-contract claim if one arises can help you best protect your rights and options.
Common Types of Breaches of Contract
Contractual breaches come in several types. A party may commit an actual or anticipatory breach. An actual breach occurs when a party fails to perform some obligation under the contract. An anticipatory breach occurs when a party indicates they do not intend on fulfilling their contractual obligations, even though the time for performance has not yet expired.
Actual breaches of contract also fall into the categories of minor and material breaches. A minor breach of contract involves a party’s failure to perform some ancillary obligation that does not form part of the contract’s primary purpose. A material breach of contract occurs when a party fails to perform some contractual obligation that causes the contract to fail in its essential purpose. When a minor breach occurs, the non-breaching party must continue performing their contractual obligations or risk causing a material breach. However, the non-breaching party may pursue a legal claim for losses caused by the breach. A material breach, on the other hand, entitles the non-breaching party to cease performance and pursue claims for relief, such as financial compensation or specific performance.
Steps to Take After a Breach of Contract
Steps you can take when a breach of contract dispute arises include:
- Review your contract to understand your and your counterparty’s respective obligations and rights and to confirm the contract’s provisions regarding what constitutes a breach, required alternative dispute resolution, and available compensation.
- Send your counterparty a notice of claim or demand letter stating the facts you believe establish their breach of contract and requesting a remedy, such as the counterparty’s compliance with their contractual obligations or financial compensation.
- Consider alternative dispute resolution procedures, such as mediation or arbitration.
- Contact a litigation attorney to discuss your rights and options, including whether litigation may become necessary.
- And do not stop performing your obligations under the contract unless an attorney you trust advises you that the other side has materially breached or anticipatorily breached. Because if you are wrong, the other side will turn the tables claiming you are in breach and prevail.
Legal Remedies for Breaches of Contract
In a breach of contract claim, you may have various avenues for pursuing relief from the losses caused by the other party’s breach. Common types of legal remedies in contractual claims include:
- Financial Compensation – A non-breaching party can request monetary compensation for financial losses resulting from a breach. Typically, this is expectancy damages, meaning what you expected to receive if the contract had been fully performed.
- Liquidated Damages – When parties cannot precisely calculate financial losses from a contractual breach, they may agree to a liquidated damages provision, which entitles the non-breaching party to an award of the estimated loss caused by the breach.
- Rescission – A party may ask the court for rescission, which cancels the contract and orders relief necessary to restore the parties to their pre-contractual positions.
- Specific Performance – In rare cases where monetary compensation cannot afford the non-breaching party adequate relief, a court may award the non-breaching party specific performance, which obligates the breaching party to fulfill its contractual obligations. For example, a court may award a real estate buyer specific performance, requiring the seller to close and deliver the property to the buyer. This is because all real property is deemed to be unique so awarding damages to the buyer to purchase another property does not make the buyer whole.
Contact a Contract Litigation Attorney Today
When you have a dispute over a possible breach of a commercial agreement, you need experienced legal advice and advocacy to protect your interests. Contact August Law today for an initial consultation with our knowledgeable team to discuss your case and learn more about your legal options for seeking a favorable resolution to your contract dispute.