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Resolving breaches in contract: What you need to know

A breach of contract sounds bad, and it very much is. In most people's worst nightmares, it's a breach of contract that leads to their business ideas ending up in competitor's hands. The reality is that breaching a contract does have far-reaching consequences and does need to be taken seriously.

A breach of contract occurs when one party doesn't fulfill its obligations to another. The two, or more, parties have a contract. By failing to meet their obligations, one or more party breaches the contract.

How do breaches in contracts occur?

It depends on the situation, but breaches might happen if someone doesn't deliver goods or services on time or doesn't perform as expected in the contract's details. For example, if a coffee shop has a contract with a coffee supplier to receive 10 new bags of coffee each day and fails to receive any bags for several days due to mistakes in delivery, this could be a breach of contract.

Another example could be if a singer decides he or she is going to perform for a company's party. Both parties sign the contract and agree that the singer will participate for two hours with a half-hour break in the middle. The singer will make $500 for the time he spends at the event. When the event is over, the company pays only $400, failing to pay what was agreed. This is also a breach of contract.

After a breach: What you can do?

After a breach of contract, there are a few things you can do. First, you can reach out to the party who breached the contract to attempt a resolution. For example, in the case of the coffee company above, delivering 40 bags of coffee four days late may be enough to resolve the issue. Maybe, giving the company a break on the cost or delivery fees would be enough to make it happy. It's worth looking into ways to resolve the immediate dispute and save your working relationship.

If you cannot come to an agreement over the breach, then you can consider a lawsuit. Lawsuits under $7,500 usually go to small claims court, though every case is different. If you do not want to pursue a lawsuit, you may wish to consider mediation or arbitration.

Mediation takes place with a mediator, who is a third party with no vested interest in the outcome. The mediator's goal is to help you and the other party resolve your dispute in a healthy way. The mediator does not make a decision for you.

If that's too passive, arbitration may be a good option. Arbitration involves a third-party arbitrator who listens to both sides of an argument. The arbitrator then determines what should happen and makes a ruling. In most cases, this ruling is binding.

These are a few things you can do if your contract is breached. Remember, many cases don't require a lawsuit, but if yours does, pursue it quickly.

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