You always live up to your business contracts in Southern California. Unfortunately, not all business owners do, and when this happens, a breach of contract occurs. What does this mean, and what can be done?
A breach of contract occurs any time one party to a contract does not fulfill any one of their contractual obligations. And, both parties can simultaneously or individually breach their contractual obligations.
However, not all breaches are created equal. Not all breaches justify or warrant business litigation as not all breaches are material breaches of contract.
For example, the timeliness of a delivery may be vital for a delivery that spoils, but not so much for a durable good. Similarly, the installation of wiring and plumbing could delay the construction of an entire home, so its delay could be material, but the installation of a refrigerator would likely not delay a home’s construction.
The question of materiality is key
This question of materiality is key to whether business litigation is warranted because it goes to the question of both whether a breach occurred (can I sue) and damages (where to sue). If a breach was not material, a lawsuit may not be appropriate as you were not harmed, the contract was substantially performed and you likely had no damages.
Conversely, when the breach was material, business litigation is appropriate. This means that your business was harmed and you did incur damages. And, the amount of those damages will indicate whether you should sue in small claims or state or federal court.
You own a Huntington Beach grocery store, and you purchase produce from a farmer. You contract with a shipping company to ship that produce to your market in time for it to be ripe and perfect for your customers. This timing is written into the contract as its importance.
However, the shipper fails to live up to this timing requirement and delivers spoiled produce, losing you $10,000 in produce and $50,000 in profit. The shipper’s location would determine for the court where you are able to sue the shipper for breach of contract.
In court, you can sue them for your lost produce cost, profit and prejudgment interest on your lost profit.