Businesses engaged in the selling of goods often enter into sales contracts with buyers. These contracts are formed when a business agrees to supply goods to the buyer by a certain time, and the buyer agrees to pay money in exchange. Sales contracts are legal documents, and when a party breaches the contract, the breaching party can face negative consequences.
Breaches can be relatively minor, such as missing a delivery date. Minor breaches will most likely not result in a lawsuit. Material breaches are those that are so severe they destroy the contract itself. Examples would be providing a different item than that specified or failing to pay the money owed under the contract.
If a material breach occurs, the injured business may file a breach of contract lawsuit against the other party. . Through a lawsuit, the injured business may be able to recover consequential and incidental damages. In rare cases, the court may additionally award punitive damages. However, such litigation can be time-consuming and expensive
Contract disputes sometimes arise in the ordinary course of business. In order to prevent potentially expensive lawsuits from occurring over perceived contractual breaches, some businesses include arbitration clauses in their sales contract documents. An arbitration clause can mandate the parties submit their dispute to arbitration and can forbid either party from suing the other. If the clause is a binding one, the parties will be bound by any decision handed down by the arbitrator.
When drafting contracts or when attempting to settle a dispute, a business may benefits from having an attorney look over the case or review the contract before it comes into force. This may help limit disputes and protect a business’s rights.
Source: Houston Chronicle, “What Can Happen if You Breach a Sales Contract?“, Lee Nichols, December 07, 2014