Many businesses—likely even most businesses—rely on contracts to conduct their business. Unlike personal relationships, most business relationships involve contracts. Even retail stores, which for the most part have no formal contracts with their customers—save for those businesses selling big-ticket items that finance those sales, such as car dealers—rely upon contracts with the businesses that provide them with the necessities that they have to purchase to operate their business. The corner convenience store doesn’t have contracts with the people who walk in to buy a soda or a hot dog, but it has contracts with the companies that supply the store with the sodas and the hot dogs. Breaching those contracts—by either party—can have devastating consequences for both businesses involved.
How Does a Contract Breach Impact a Business?
Businesses rely on predictability. Certainly, you cannot predict some things with total accuracy, such as how much of a certain product people will buy a year from now. But businesses have to make predictions of that kind every day. They take into account current economic conditions, expected future economic projections, and the like to build a model of their business needs in the coming months.
Based on those projections, a business enters contracts with other businesses, either to obtain the products or services they need for their business or to provide another business with products or services necessary for that business to operate. Whether the product is machine parts, raw materials, or a service such as payroll processing, businesses enter contracts to buy or sell those products and services to ensure that they will have a source or a purchaser that will enable them to continue operating.
If one party breaches the contract and declines to provide the product or services contracted for—or declines to purchase the product or services—the business on the wrong end of that breach is left in the lurch. Suddenly it’s left without a provider of something necessary to continue its business or, just as bad, left without a purchaser to the goods or services the business sells. This can result in a major disruption to a business, with at least some revenue suddenly and unexpectedly cut off because the business is left without a crucial element of what it needs to sell its products or services, or is cut off from a market where it sells its goods or services. Either way, the business is left scrambling to find a new source or market necessary for its continued economic survival.
What Can You Do if Another Business Breaches a Contract?
Obviously, if a business breaches a contract with your business by declining to perform according to the terms of the contract, you can sue. Initially, of course, you will be scrambling to replace whatever business necessity the breached contract was supposed to provide so that you can stay in business. Suing is cold comfort—even if you win, if you lose your business because of a breach of contract by one of your suppliers or purchasers. Assuming you are able to keep your business going, what can you hope to gain through a lawsuit?
If you prevail on a breach of contract action, the law is intended to put you back in the economic position in which you would have been had the contract been performed according to its terms. You can achieve this through damages awards in a number of forms, including:
- Liquidated damages, based on a contract term or sometimes by a court judgment
- Specific performance, where the court orders the breaching party to perform based on the terms of the contract.
- Consequential and incidental damages, including foreseeable losses caused by the breach
- Compensatory damages, which reimburse actual provable losses
There are other forms of damages available, and Texas law also allows recovery of attorneys’ fees if you win your breach of contract action and recover damages.
If Someone Breached a Business Contract With You, Consult a Houston Business Lawyer
If you believe that someone with whom you have been doing business has breached a contract, the lawyers of Weisblatt Law Firm, LLC, can help. Weisblatt Law Firm routinely represents clients who are involved in business disputes and can help you with yours. If you face such a business situation, contact us (713) 352-0847, or through our online contact form.