A business contract has to be thorough, but something a lot of people forget about is a breach of contract. A contract put together by a legal department or attorney will likely address breaches, but if you're creating a contract on your own, you may forget to include some issues including breaches. You really do need to address potential breaches of contract when you create the contract, to begin with.
It Gives You a Procedure to Follow
A breach of contract can be frustrating, and many times you or the other party may feel unsure about what to do and how far to go in terms of remedying the situation. You can place information in the contract that details what needs to be done. For example, you may want to give the person who caused the breach a chance to fix things with certain requirements, like having a project done within an additional amount of time that's specified in the contract. Having procedures already defined makes things a lot easier if a breach occurs.
It Ensures Actions and Compensation Are Fair
When a breach of contract occurs, you want both parties to feel like they can resolve the situation fairly, depending on how bad the breach was. You may want to define when legal action such as a lawsuit is applicable, or you may want to define when arbitration is better. You may set monetary amounts for making yourself whole if the other party causes a breach that results in financial issues for you. It's best to speak with a business law attorney to ensure you know what you need to address.
It Lets You Specify What You'll Consider a Breach
Technically, a breach of contract is any failure to deliver on any terms, but in reality, it's a little more complicated. For example, if you're supposed to deliver a completed project by a certain date, and you don't, that's technically a breach of contract. Now, what if you fail to deliver that product because you were ill? That's a very different situation, one that shouldn't face the same consequences as a failure due to negligence. Obviously, if you were ill, you'd try to contact the other party, but you'd want to know that you'd be OK if, for some reason, you couldn't reach the other party. When you write up your contract, you can specify what extenuating circumstances change a breach into a situation that you can both work with.
Always consult with a business law attorney when drawing up a contract. You and the other party have to have a contract that is satisfactory and that covers as many bases as possible.
For more info, contact a local business law attorney.
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