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Litigation Blog.
The seasoned lawyers and litigators at The Rubinstein Law Firm are here to share their insights with you.

How small businesses can be affected by a breach of contract, and what remedies are available

Small businesses across Michigan are reliant on contracts and the security they provide for both business owners and employees, third-parties and others. In a perfect world, contracts are honored and upheld, and all parties involved adhere to them and reap the benefits. However, all too often, small businesses are faced with a breach of contract that threatens to undermine their profits and livelihood.

When a contract is breached

Quite plainly, when a contract—the legal agreement to fulfill a number of obligations by the parties in agreement—is not being upheld, a “breach” occurs that can derail ongoing business. A breach of contract can take many forms: a vendor may simply stop the fulfillment of their agreed work or may fail to perform it on time, for example.

When a breach of contract is alleged, typically, there may either be an attempt to enforce the contract or to recover damages for any financial harm that resulted. While an informal talk may resolve the matter, more often than not, a lawsuit may be required.

How a lawsuit can help businesses after a breach of contract

Taking the matter to court can help a business in seeking damages, specific performance or cancellation of the contract and subsequent restitution.

Damages can take the form of compensatory damages aimed at helping the non-breaching party recover from the contract dispute, or punitive damages, meant to punish the wrongful party. Nominal (damages rewarded when a breach does not cause provable money loss) and liquidated damages (predetermined damages outlined in the contract in the event of a breach) may also be discussed as a possible remedy.

Depending on the amount in dispute, the potential lawsuit may be resolved in small claims court. However, any business facing a breach of contract matter should consider consulting an experienced attorney who can clearly and effectively assess the matter at hand.