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What Breach Of Contract Means To Your Organization

Multinational organizations and small family businesses alike rely on contracts to keep the company running smoothly. Whether the contracts represent legal agreements with vendors, suppliers or construction firms having the terms of the agreement broken can lead to business disruptions. To fully understand your risks and the legal options available to you, it's important to recognize the differences between various types of breach.

While "breach of contract" is the general phrase used to highlight a situation in which the terms of an agreement were broken, there are subtle differences that should be noted.

  • Actual breach versus anticipatory breach: Disputes do not exclusively arise only when a contract has been broken. The terms actual breach and anticipatory breach highlight that difference. An actual breach is when the terms of the contract have clearly been broken. One party refuses to fulfill his or her side of the agreement, whether that entails missing a due date, not honoring a price, only partially finishing a project, or numerous other situations. An anticipatory breach, conversely, occurs when one party announces that he or she does not intend to honor the contract.
  • Material breach versus minor breach: Based on the severity of the breach, it can be said to be either a material breach or a minor breach. A minor breach, also called a non-material breach, is something that violates the terms of the agreement but doesn't, in itself, ruin the spirit of the contract. A subcontractor, for example, who was supposed to use a particular brand of insulation but chose a different brand based on cost or availability can be said to have violated the contract. Since the work was still completed, however, it would be a non-material breach. A material breach, then, is a violation that undermines the entire core of the contract. If the subcontractor from the previous example chose to simply not install insulation at all, that would be a material breach of contract.

A protracted business litigation matter can devastate an organization in many ways including loss of productivity, employee morale, business reputation and vendor trust. No matter if your business is a startup or an established company, a family business or a multinational organization, you rely on contracts to guide your growth and profitability.

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Plunk Smith, PLLC
1701 Legacy Drive, Suite 2000
Frisco, TX 75034

Phone: 972-370-3333
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Plunk Smith, PLLC
Plunk Smith, PLLC