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Contracts are made between individuals or businesses to protect the interest of both parties. A verbal agreement is one thing, but it is good to have a written contract to make sure both parties can be held accountable if they do not follow through. Breaking a contract could find you facing legal challenges, and that is often incentive enough to keep the contract. No matter which end of the breach you are on, whether you are the victim or the one who broke the contract, you should contact a business lawyer as soon as possible to help with your case.
Every state has its own rules and contract law. While the basics are the same — if a contract is broken there are legal remedies available — each state has its own take on the matter. In Maryland, the plaintiff must prove there was a contractual obligation, and that the defendant failed to deliver. Unlike some states, there is no need to prove damages resulted from the breach of contract. Maryland’s law states “One may recover nominal damages even though he has failed to prove actual damages.”
What is a breach of contract?
When a contract is signed, both parties agree to do or provide certain things. One may agree to provide a good or service, and the other side agrees to pay for that when delivered. A breach of contract happens when one of the two parties fails to live up to the obligation that was signed for.
There are two levels of breaking a contract, called material and immaterial. A material breach would be one that caused the offended party actual damage that can be measured in dollars. An immaterial breach is still a breach, but one that caused little if any actual damage.
If a contract said some goods were to be delivered by the end of the day on a certain date, and they were delivered first thing the next morning, that would be a breach but probably caused little damage. However, if the contract stated the date of delivery was crucial, and the victim lost money or was injured in some way by the failure, that would be a material breach.
What happens when you sue?
The contract exists to make sure both parties do what they said they would do. Most of the time the two parties can negotiate and come to an agreement to settle the matter. When that does not happen, you may sue the offending party. If the number of damages was relatively low, small claims court is where it would be filed. For larger amounts, the regular court would be the option. The parties may also opt for arbitration, or have a mediator listen to both sides and offer a resolution. Both sides would have to agree whether the mediation would be binding.
It is unlikely anyone would be sent to jail for breach of contract as it is not considered a crime as such. Punitive damages are also normally not allowed. The point of suing is to make things right, and that is what can be ordered in court. Breach of contract is considered a civil matter, so any “punishment” will be in the form of a judge ordering you to pay to make up for losses caused.
Remedies in court
There are three basic remedies for a breach of contract lawsuit.
- Damages
- Specific Performance
- Cancellation and restitution
Damages are compensation for what breaking the contract cost the person who is filing the suit. For instance, if you are making a product to sell, and need parts to make that product, you might have a contract to have them delivered by a certain time. If you are unable to make your product as a result, you could show that you lost a certain amount in potential sales as a result. This would be considered compensatory damages.
Sometimes the damages are very small, and these are called nominal damages. This could happen when you are inconvenienced but did not lose any money or lost very little. Liquidation damages concern things specifically mentioned in the contract. Punitive damages are also possible but rarely given in a civil case. The point of the law is to restore the person who was wronged to the position he or she was in before the contract happened.
Specific performance is when a judge orders what was signed for in the contract to be performed. Damages may not solve the problem if it was a service to be performed.
Cancellation and restitution is a third possible remedy that could be sought in court. Restitution restores the offended person to the place they were before, or to a position where they would have been if the contract had not been broken. In these cases, the contract is canceled once restitution is made, and is no longer in effect.
What if you break the contract?
Sometimes breaking a contract is something you cannot help. Even if you are an honest businessperson and are trying to do the right thing, you could find yourself in a position of not being able to deliver what you promised. If you find yourself in that situation, it is best to try to work out an agreement without going to court. Try to work out something with the other party first. If you do end up in court it is wise to have an attorney who knows the business laws of Maryland, and who can help you make the right moves.
Why you need an attorney
It is possible to go to court on your own, especially in small claims court. It is a good idea to try to settle a contractual matter without going to court, but that is not always possible. It is a good idea, however, to consult with a business attorney for many of your business dealings.
If you are entering into a large contract or one that has a lot of significance to your business, it is a good idea to have an attorney look over the contract before it is signed.
Even with the best intentions, sometimes things still go wrong. No matter which side you are on, the one who broke the contract or the one who had it broken, you may end up in court. Even before you go to court, a good business lawyer can help you understand your legal rights, and how to legally resolve the matter. When the case cannot be resolved, and you have to go to court, you need someone on your side who understands the law as it relates to business.
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