Business | Franchise | Employment | Litigation

“He Ripped Me Off!” What Happens When Your Contract Is Breached?

In 2007, Rain, a Korean pop-star, canceled a show in Honolulu just days before the concert was scheduled to occur. After a lengthy jury trial, Rain was found liable for breach of contract and was ordered to pay the Hawaiian concert promoter $5 million in punitive damages, $1 million for damages related to fraud, and $2,286,000 for breach of contract.

Believe it or not, contract breaches are not uncommon, and not something that happens only among the rich and famous. Breaches of contract can be a threat to a business of any size. Whether your business has performed a service and not been paid, or rendered payment for goods and not received shipment, being “ripped off” can be disastrous.

A breach of contract occurs when terms of a contract are unfulfilled, regardless of a party’s intent to meet the terms. There are various types of contract breaches, including material breach, fundamental or repudiatory breach, and anticipatory breach. The specific type of breach may lead to different avenues for recovery, and each situation varies.

To merit a breach of contract action, some basic conditions need to be present. First, there needs to be a valid contract. Whether written or verbal, a contract must include an offer, acceptance, and the exchange of something of value. A verbal contract can be enforceable based upon each parties subsequent actions (an implied contract), but terms of oral agreements are difficult to prove.

Once you establish the existence of a contract and a breach, your business attorney must analyze your damages prior to filing suit. There are various remedies available in breach of contract cases. Compensatory damages awards enough money to reimburse costs and make up for losses. Liquidated damages are damages that were specified in the contract (such as damages for a late delivery). Expectation damages may be awarded for loss of potential revenue caused by the breach. Punitive damages, everyone’s favorite, are damages awarded as a penalty for reckless or unethical behavior. In the United States, attorney’s fees can only be awarded if provided for in the contract or by statute, as previously explained here.

If you or your business have been damaged by a breach of contract, whether you’ve been intentionally “ripped off,” or whether circumstances merely changed resulting in one party failing to meet its obligations, you have options. However, it is important to understand that the contract terms dictate what types of damages to seek. That’s why it is so important that your contracts are written to protect your interests – and to give you a position of strength should you be forced into court. Please download our complimentary special report for more information regarding creating strong contracts for your business.

If you’re facing a possible breach of contract, we can help you explore your options. Contact us today to learn more!

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