As a business owner, you know that a good contract is the best way to protect your business and your financial future. Though most of your partners will do everything they can to adhere to the terms of the contract, there may come a time when at least one party fails to uphold their end of the deal. This is known as a breach of contract, and while there are many different types of breaches that Minnesota business and entrepreneurial law attorneys know about, some happen more often than others. Here are some of the most common types of contract breaches business owners need to watch for.
1. Failure to Disclose Defects
If you’re buying a property for your business, you’ll enter into a real estate contract with the seller. This contract outlines the responsibilities for both the buyer and the seller. And one of the key responsibilities all sellers have is to disclose known defects with the property prior to the sale moving forward. The defects could include issues with wiring, zoning concerns, known plumbing and septic issues, lead-based paint, and other similar concerns.
If the seller does not disclose those defects, they’ll be in breach of contract. While it’s up to you, this type of breach does give you the opportunity to back out of the sale and look for properties that may better fit your needs.
2. Failure to Pay or to Pay on Time
Contracts can also govern transactions, especially if you’re providing products to other business owners. These contracts outline how much the buyers will pay for your products, how much you’ll send them, when payments are due, and other similar terms. If the buyer fails to pay in full or pays you late, they can be found in breach of contract.
Your attorney will be able to explain the best next steps if a buyer fails to pay you on time. This may involve withholding product, terminating the business agreement, and in some cases, suing the buyer for damages.
3. Fraud
When you enter into a contract with another business, you trust that the company representative you’re dealing with has the full authorization to make deals on the company’s behalf. If they act without the full authorization of the company they’re representing, they may be committing fraud.
Fraud is, by nature, a breach of contract since the person you’re working with is representing an organization or individual without that organization’s or individual’s permission. In cases like this, the representative can be liable for damages. But most importantly, you reserve the right to terminate all negotiations and discussions immediately.
4. Anticipatory Breach
Situations can change even in the middle of contract negotiations. If either party knows that they’re going to be unable to honor the terms of their agreement, they’ll initiate an anticipatory breach. Ultimately, it’s up to you to decide how you want to proceed if you’re encountering this type of breach. You may want to renegotiate terms or terminate the contract altogether.
5. Actual Breach
Happens when one party refuses or willfully does not perform their responsibilities of the contract without a clear and legal excuse/reason why. When this happens, the entire contract can be canceled without issue, and depending on the situation, you could be entitled to damages or other forms of resolution. If you suspect an actual breach will or has occurred, the best thing you can do is speak with an experienced attorney. They’ll be able to assess the situation and advise you on how best to proceed.
Work With a Minnesota Business and Entrepreneurial Law Attorney
Breaches can derail your progress and make it harder for you to close a deal. And the best way to avoid breaches is to make sure your contracts are legally binding, have clear terms, and are easily enforceable. An experienced Minnesota business and entrepreneurial law attorney can help. Contact us today to schedule a consultation.