Breach of contract
- John Deane
- Updated: Thu, 2nd Mar 2017
You may want to end a contract quickly but contract termination and breach of contract can give rise to consequences. We help you work out a way to reduce your exposure. If you are faced with a claim for breach of contract we will act quickly to defend your case. You may well find a settlement works best – we have plenty of experience in the negotiations.
Contract termination and breach of contract services include:
If there has been or is likely to be a contract termination or breach of contract it pays to run it by us to see if we can prevent escalation. We know that any breach can be disruptive. We work out the solutions. Once the dispute is resolved, we often work with businesses to prevent similar issues in the future. Often a quick review will save you money.
Contract termination and breach of contract – analysis of the case
Focused means picking out the key points that will achieve success.
The areas to distil include:
- Establishing the facts that count and dismissing irrelevancies.
- Analysis of the categories of damages open to you.
- Obligation to mitigate the loss.
- Recovering damages.
- Opportunities for settlement out of court with a view to preserving your legal costs.
Establishing the facts
If there has been a contract termination or breach of contract, the first practical steps we will establish are:-
- If there is a written commercial contract what does it say?
- Is your contract a business to business arrangement or business to consumer? If the latter, whatever the contract may stipulate, it may well be overruled by statute or have terms implied into it.
- We check for evidence of any alterations to the written terms in subsequent emails, correspondence or otherwise. Everyone should be as clear as possible as to the latest agreed terms.
Variations to the business contract terms
It is not uncommon for businesses to vary the terms of a written contract. This is particularly the case for parties contracting over a period of time, e.g. licensor and licensee, and agent and distributor. We collate the email chain to see if there have been any variations to the business contract agreed or imposed during the business relationship.
Waiver of business contract
We warn you to be alive to the possibility that if you take no action you may be considered to have waived the breach. On the other hand, don’t act too hastily as you may make a mistake that means you are in breach yourself.
Fundamental breach of contract
Different contract clauses have different implications – is the breach a fundamental breach? Does it go the very essence of the bargain? If not, your options and remedies may be different. If yes, then the remedies open to you are vast. We interpret and advise accordingly.
Breach of contract damages
Whether we are acting for the business that has caused a breach of a business contract or is alleging a breach of a business contract we will need to assess the size of the claim.
Usually not black and white
In our experience most breach of business contract cases are never black and white which is why a business dispute has arisen. We apply our objective judgment to provide an honest opinion on your chances of success.
Recovery of damages
There are many principles involved in determining what alleged losses may or may not be recoverable for breach of business contract. The approach we will take depends upon who we are acting for.
Some of the key areas we will consider include:
Remoteness and breach of contract
The loss must not be too remote to be recovered. In other words, losses must arise according to the normal events arising from the breach of contract itself or as may reasonably be supposed to have been in the contemplation of the parties at the time they made the business contract. Frustrating events do not qualify, e.g. fire, flood, explosion, or a change in the law making performance illegal. These events make performance of the contract impossible.
Causation for breach of business contract
The party bringing the claim must prove on a balance of probabilities that the breach of business contract caused the loss. The court will usually first consider what would have happened “but for” the breach. Alternatively, a court may consider the “lost chance” approach which looks at the chances of what might have happened.
Mitigation following breach of business contract
The party bringing the claim cannot recover damages for any part of his loss which he could have avoided by taking reasonable steps. This is referred to as the duty to mitigate.
The duty to mitigate following breach of business contract
There are two limbs to the duty to mitigate, which arise after the breach has occurred. The party claiming breach of contract must take reasonable steps to minimise his loss (expenses in taking these steps can also be recovered) and he must not take unreasonable steps to increase the loss incurred.
Breach of business contract claims
Most businesses do not want to take the risk and costs of litigation. We help businesses in a number of ways work towards settlement of their business contract disputes. It may be necessary to proceed as if the case were heading for trial but run parallel without prejudice discussions.
In practice, most breach of contract claims are resolved out of court. But, we do have the expertise to litigate and prepare cases for trial. Showing the other side you are prepared to litigate can in itself accelerate settlement.
Letter before action
The first step is to issue a letter before action. This often causes the defaulting party to listen to sensible settlement offers if its defence is weak. We calculate losses for the innocent party to ensure that the letter before claim is watertight. Once the letter before claim is issued, the defaulting party will have to reply within a set time limit. Failing a response, court action can be pursued.
Defending a claim
If you have received a letter before claim there will usually be a tight time scale for a response. We will work with you to evaluate the merits and deal with a response and defence.
We will outline the likely costs at each stage of litigation. You will know where you stand, and we do not incur costs without express approval.
Contract termination and breach of contract – successful cases
We have resolved problems for a variety of businesses such as:
- Agency agreements;
- Franchise agreements;
- Framework agreements;
- Investment agreements;
- Joint ventures;
- Licence agreements;
- Partnerships; and
- Shareholders’ agreements.
Recent matters include:
- Drafting sub-contracts for a governmental body framework agreement;
- Dealing with an outsourcing agreement relating to energy supplies where allegations involving the quality of service arose;
- Settlement of damages payable under a franchising agreement for a leading retail brand where the franchisee did not abide by the contractual terms;
- Review of damages payable under a share option agreement where it was alleged the valuation of the business followed the wrong method to produce a misleading valuation and thus incurred the acquirer loss;
- Litigation against a major bank for attempting to avoid a bonus payment to one of its key traders in the OTC derivatives team who maximised returns on commodity markets;
- Claiming on behalf of a large London recruitment firm against a consultancy business who failed to deliver to the specification on time and on budget.