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Understanding contracts and breach of contract claims

Contracts are meant to be followed. There are specific penalties possible for breaching a contract. Without those penalties, having a contract would be a pointless waste of time. You should understand a few basic points about contracts and breach of contract if you are using them in your business.

There are two components of a contract that are crucial when you are creating one. The first is the obligation. This is what each party is responsible for doing. The second is the remedy for failing to meet the obligations.

There are two types of breaches that might occur -- immaterial and material. An immaterial breach is one that doesn't cause any damages to the party who was receiving the obligation. For example, if a company is supposed to deliver marketing materials to you by a certain date but delivers the next day, you would likely be dealing with an immaterial breach.

That example could result in a material breach, which is one that is associated with actual damages, if the marketing material printer knew that you were having an event the night of the expected delivery. If you put a clause in the contract that said time was of the essence due to the event, you might be able to say that there was a material breach.

When a contract is breached, you might opt to enforce the contract. This could mean that you call the terms of the contract into effect. You can do this by taking the other party to court to recover the damages you suffered and having the contract enforced.

Source: FindLaw, "Breach of Contract and Lawsuits," accessed Oct. 13, 2017

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