A breach of contract occurs when there has been a violation of any of the agreed terms and conditions set out in a binding contract.
Breaches can range from minor to major incidents and can include areas such as failure to deliver the product requested or late invoice payment.
For all not considered a crime, a breach of contract can negatively impact a business, especially when it comes to late payment and cash flow.
Of course, you do have the option to take the other party to court over a breach of contract to get what you have been promised, but this can be costly and time-consuming.
At Direct Route, our team specialises in the collection of late payments, and we work with businesses to successfully collect on outstanding debts – make sure to visit our site to find out more.
Breach of contract explained
A contract is an agreement (written, verbal, or implied) between two or more parties, with each party agreeing to something according to the terms of the agreement, i.e., providing a good or service in return for payment.
For a contract to be binding, there must be some form of mutual agreement i.e. there must be an offer and acceptance.
A breach of contract is when there has been a failure to meet a promised obligation, i.e., when one party fails to deliver what is set out in the contract.
Breaches can occur whether the contract is written, verbal, or implied, and the same rules apply.
Types of breaches of contract include:
A minor breach – for example, you don’t receive an item/service by the specified due date.
Material breach example – the goods/services are different to what you were expecting/had agreed.
An actual breach of contract example is where one party refuses to fulfil their role in the agreement and breaks the terms of the contract.
An anticipatory breach of contract example includes when one of the parties states, in advance, that they will not be able to deliver on the terms set out in the initial contract.
Note: In some instances, a breach of contract is viable if both parties agree and it is for the benefit of both parties.
How to avoid a breach of contract
- Make your agreement clear and concise
- Make sure everyone understands their responsibilities and what they are expected to deliver and fulfil
- Outline the consequences if there is a breach of agreement by either party
- Look into those you are looking to work with and, where appropriate, carry out relevant checks
- Ensure both parties print, sign, and date the contract/agreement.
How to deal with a breach of contract
Firstly, you need to understand and establish if there has indeed been a breach of contract. Then, it becomes important to find out the reason behind the breach. For example, is the reason for late payment because they are waiting to be paid, and if so, could a partial payment be made now with the remainder paid upon receipt of monies?
It is always recommended that you build into your contract what will happen if either party breaches any aspect of the contract.
For example, if the invoice is not paid on receipt of the goods being delivered, the consequence could be the charge of a late payment fee plus additional interest as allowed as part of debt recovery. Building this into your contract will enable you to implement it successfully and the court to approve it (if the breach goes to court).
A breach can occur if:
- One party refuses or does not fulfil their duties as outlined in the agreement
- The work carried out and presented is defective
- There has been non-payment or late payment with no reasonable explanation
- There has been a failure to deliver the requested goods/services
- Goods don’t match the description of what was intended
- And more.
In order to prove a breach has occurred, you must be able to show that there is a contract in place and that there is a clear unfulfillment by one party, i.e., they have not met the terms and conditions of the contract.
If this matter proceeds to court, you will also need to demonstrate that you have taken all reasonable steps to rectify this situation. For example, you have sent reminders, chased emails, followed up calls, instructed debt collectors, etc.
Understanding a breach of contract
Having a contract or agreement in place can provide considerable peace of mind. However, we understand that when a breach happens, this then becomes time and resource-consuming.
At Direct Route we can help with breaches of contracts that relate to late payment of invoices. Using our years of experience and expertise in debt collection techniques, we help to successfully collect outstanding debts on your behalf.
To find out more, speak to a member of our professional team today at 01274223190 or email memberbenefits@directroute.co.uk.
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