Virtually every new contract that a business negotiates is a potential source of revenue or means of better ensuring operational stability. Contracts can lock in vendor deliveries, secure work from independent contractors and establish expectations for employees.
Businesses typically include very clear language in contracts to ensure the other party knows what is expected of them. They may even include penalties such as late payment fees if the other party does not adhere to the terms of the contract. Unfortunately, contract violations do occur with some regularity.
When direct negotiations fail, it might be necessary to initiate litigation in the civil court. A contract-related lawsuit can help resolve the dispute and potentially minimize organizational losses. What can the civil courts do to settle the disagreement related to a contract?
Judges have multiple options available
The authority of a civil court judge allows them to resolve a contract breach scenario in a variety of ways. Sometimes, the best solution available involves terminating the contract so that the plaintiff no longer has any obligations to the party that breached the agreement.
A judge has the authority to enforce penalty clauses contained in the contract as a way of reimbursing one party for the costs that the breach has generated. In fact, judges have the option of awarding damages. They can require that the party that breached the contract compensate the other party or the full economic impact generated by the breach of contract.
Judges also potentially have the option of issuing an order of specific performance. They can require that one party fulfill contractual obligations or take steps to remedy the damage caused by the breach.
Lawsuits can lead to settlements
One of the ways that a breach of contract lawsuit benefits an organization is by creating an incentive to resolve the dispute. Most executives and business owners don’t want to deal with the expense and publicity possible in a lawsuit if it goes to trial.
Receiving service for a pending contract-related lawsuit could motivate one party to correct the breach of contract. They may also request mediation or sit-down negotiations to settle the matter. Quite a few contract lawsuits actually settle before going to trial.
Recognizing that legal action is sometimes the only way to resolve a contract dispute can be beneficial for those running companies. Businesses negatively affected by contract breaches do have protection under the law.