How to Avoid a Breach of Contract Claim

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Reputation is everything.  More than likely, you take pride in the goods or services you provide.  You already know that satisfied customers increase sales and earning potential.  To put it into perspective, the same is true of negative reviews. For sure, you never want things to reach the level that causes a client to assert a breach of contract claim against your company.   Therefore, you need to consider some steps to limit the potential.

As you may know, Hurricane Sandy generated some breach of contract claims.  Unfortunately, some unscrupulous builders and home renovators took cash up front and never completed jobs.  However, other types of businesses may also jeopardize their standing.  Here are some examples:

  • Photographer fails to deliver wedding pictures
  • Distributor provides substandard materials
  • Landlord rents space to another tenant despite lease agreement

The bottom line is that as a business owner, you need to protect your company against disgruntled customers.  While it’s true that you will never please everyone, you’ll want to do your best to stick to your word.

Breach of Contract Claims Start with the Contract

It’s a matter of common sense.  To pursue a breach of contract claim against your business, the contract will have particular significance.  You may decide that this is not an issue.   After all, you only had an oral agreement.   If that’s the case, you should take a look at our article on handshake agreements.

A breach of contract claim teaches essential lessons to many business owners.  First and foremost, the language of the contract sets the tone of the company/client agreement.  Promises are promises.   Some are difficult to keep but should be addressed as a matter of course. Frankly, you can’t pick up a boilerplate contract document and expect it to work.  Your company needs a tailored agreement that fits your business model.

Keep in mind that not all breach of contracts end in favor of the discontent client.  For now, imagine that your company produces websites.   You promptly develop the site and do everything right.   However, the competition is fierce.  Your client wants to rank on the first page of Google within a month of making an internet debut.

Just about everyone can tell you that such an expectation defies logic.  Meanwhile, if your contract makes such promises, you could find yourself in trouble.   An experienced business attorney will likely encourage you to shy away from offering the nearly impossible.

In the meantime, you may mark down deadlines for delivery of services or goods.   Your attorney, therefore, includes contingencies in the contract language.  Case in point. To be sure, you have every intention of completing a bathroom renovation by the date specified in the contract.  No doubt you are frantic when the materials don’t come in on time.  What happens next may well depend on what is in the written agreement between you and the customer.

Basis for Breach of Contract Claims

Generally speaking, there are varied reasons you can be sued for a breach of contract.  A couple comes with formal names and is briefly described below:

  • Material Breach: A material breach of contract is perhaps the easiest to understand.  Essentially, the agreement clearly defines deadlines and provisions for goods and services.  Failure to comply with the terms of the contract opens you up to a material breach of contract claim.  Note, the use of the word “clearly.”  All things considered, some deals are vague and open to interpretation.
  • Anticipatory Breach: An anticipatory breach of contract is also defined as repudiation. Basically, the anticipation is the customer disputes your company’s intentions to comply with the contract.  They also look to relieve themselves as far as their obligations under the contract.
  • Misrepresentations: Whether the client charges you with intentional or unintentional misrepresentations under your agreement, you could face a lawsuit.  Think back to the website development company.  Were the promises of first page search engine placement an intentional or unintentional misrepresentation?

Finding a cause of action for a breach of contract is only one aspect of a potential lawsuit.  Equally important, is the issue of damages.  What harm was done as a result of the breach of contract?  Notably, Hurricane Sandy victims abandoned by home renovators faced dire consequences.  Many were out of money and had no place to live.

Let Our Law Firm Help You

Protect you and your business.   Contact the Law Offices of Lawrence M. Centanni for a critical review of the contracts you present to customers.  Also, we can help you if someone is pursuing a breach of contract against you.

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