When you enter into a contract, the parties usually intend to abide by the terms of the contract. However, circumstances change and even contracts that are carefully and professionally drafted are violated. Whether your situation involves an employment contract, construction contract, vendor contract, or commercial contract, our team has the experience you need on your side.
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Contracts are a critical part of a business. When the other contracting party violates a contract, your business can suffer extensive financial losses. Disputes can range from disagreements about how to interpret the terms of the contract to a total failure to perform the obligations agreed to in the contract. If your business is being damaged by another party's failure to adhere to a contract, we urge you to contact us to review the contract, discuss the situation, and develop a plan of action to seek the most appropriate remedy.
Contracts come in many forms, including written, oral and "implied" contracts (created based upon the conduct of the parties involved). Written contracts are by far the most common form of contracts that lead to legal disputes between businesses. For there to be a binding contract, there must be offer, acceptance, and consideration. The offer is a proposal for an exchange. Acceptance is an agreement to the proposed exchange in the exact form that it was offered (this is called the "mirror image" rule).
A proposal for different terms of exchange is considered a rejection of the original offer and is a counter-offer, which must be accepted or rejected. When the parties finally reach a meeting of the minds, a contract can exist as long as there is "consideration"—that is, something must be exchanged, whether money, time, stock, actions or refraining from certain actions.
A breach occurs when one party fails to perform the obligations that were agreed to in the contract. Disputes often arise when an agreement is reached verbally and one of the parties either disputes the terms of the agreement or denies that an agreement was made. In some cases, the lack of a written agreement can be fatal. But that is not always the case and in many cases, a verbal contract is just as binding as a written contract—the only challenge is proof since the whole case may turn on which side's witnesses are believed.
As a general rule, the remedies for breach of contract are a suit for damages or an action for specific performance. "Specific performance" means that the court orders a contracting party to take (or refrain from taking) an action promised in the contract.
A breach of contract entitles the non-breaching party to nominal damages (often $1). For a business to claim greater damages, the non-breaching party must demonstrate measurable losses. Damages are based upon the money that was lost, or could have been made had the party who failed to perform actually delivered the obligations under the contract. Or, if the contract has a valid "liquidated damages" provision, the non-breaching party may recover the amount provided in the contract—and only that amount.
There are several possible defenses to a claim of breach of contract, including an attack on the validity of the contract, or an assertion that the person who made the contract on behalf of the party did not have authority as an agent or did not have the capacity to enter into the contract. Other potential defenses include a claim that the contract itself was ambiguous, that the party was induced into the contract by fraud, or that one party was subject to duress and essentially forced to sign the contract against his or her will.
Are you involved in a contract dispute? Contact us for professional, experienced counsel. We serve Annapolis and Anne Arundel County.