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Business law: What to do when a contract is breached

Business owners in Wisconsin understand the time and attention to detail that is required to run a successful operation. Many take pride in their dedication to their business and its practices. However, some owners overlook a basic aspect of business law -- how to enforce a breached contract.

As a legal agreement between two parties, breaching a contract has consequences. There are multiple ways to handle a situation in which one or both parties fails to uphold their contractual obligations. Some contracts include provisions for just such a situation, and might outline that the issue will go through arbitration before either party may seek further legal action.

When a contract does not outline how breaches should be handled, there are typically two main courses of action that can be taken -- arbitration or a lawsuit. When the contract breach pertains to a monetary value -- such as with a failure to deliver goods or payment -- the value of the issue at hand might mean that the matter can go to small claims court. Anything worth more than about $7,500 will typically be handled through a more formal lawsuit.

Lawsuits can be time-consuming and expensive, though, and many business owners do not have the extra time to spend in court or preparing for hearings. Arbitration often provides an effective alternative to traditional lawsuits, and consists of both parties presenting their case before an impartial, third-party arbitrator. The arbitrator's decision is typically final and cannot be appealed. It may also be possible to negotiate an agreeable solution under the guidance of a mediator and respective legal counsel, although the parties are not obligated to follow the mediator's approach.

Inserting instructions in a contract for handling a breach is usually a good idea. Doing so provides immediate guidance after a breach, and can ease some of the burden associated with enforcing a contract. However, Wisconsin business law can be complicated, and reviewing all contracts for enforceability prior to signing alongside experienced legal counsel is an important step in the right direction. 

Source: FindLaw, "Contracts Basics", Accessed on Nov. 27, 2017

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