Breaking the Deal: Understanding Contractual Obligations and Breaches in Business——A contract is a deal between two or more parties that the law recognizes and can enforce. If someone doesn’t stick to their side of the deal, it’s called a breach. Knowing how contracts work and what happens when they’re broken is important for businesses. It helps them avoid legal headaches and stand up for their rights if things go wrong.
Contractual Obligations
Contracts come with obligations, i.e. things you have to do. These can be:
- Express Obligations: Stuff that’s clearly written in the contract. For example: “Deliver 50 bags of cocoa by 5pm on Monday.”
- Implied Obligations: These come from how the deal works, the actions of the people involved, or the law itself. For example: If someone hires you to deliver something, it’s implied you’ll handle it with care.
Breach of Contract
A breach happens when one party doesn’t follow through on their part of the agreement. Breaches can be grouped into:
- Partial Breach: A party does not perform a minor duty or performs a duty but not in the exact way provided. However, the main purpose of the contract is still achieved. For instance, instead of delivering 50 bags of cocoa at 5pm, it was delivered at 7am the following day.
- Fundamental Breach: Failure to perform an important obligation in a contract, which defeats the entire purpose of the contract. Such a breach allows the other party to end the contract. For instance, instead of delivering 50 bags of cocoa beans, 50 bags of charcoal were delivered.
- Anticipatory Breach: This is where one party indicates in advance that they will not fulfill their obligations.
Remedies for Breach of Contract
- Damages: This means paying money to recover losses which could be reasonably foreseen to arise from a breach. The goal is for the injured party to recover the losses they have suffered due to the breach. For example, if a seller has a contract to deliver milk at a specific time, but the buyer refuses to accept it and pay, the milk may spoil. In this case, the seller can claim compensation for the loss because it was a predictable outcome of the buyer’s refusal.
- Specific Performance: This is a court order forcing the party who broke the contract to do what they agreed to. It’s usually given when the contract involves something unique or hard to replace. For instance, if there is a contract for the sale of the golden stool of the Ashantis and the seller refuses to sell later, the court may compel them to because there is only one golden stool of the Ashantis.
- Injunction: This is a court order that stops someone from doing a specific action. It can last for a short time or a long time.
Defenses to Breach of Contract
Sometimes, the person accused of breaking the deal has valid reasons, like:
- Illegality: The contract involves illegal activities and so cannot be performed.
- Duress or Undue Influence: They were forced or tricked into signing the deal.
Keep It Simple, Keep It Clear
Contracts are all about fairness. To avoid fights:
- Write everything down clearly.
- Double-check the details.
- Get legal advice if needed.
By staying sharp, you can make sure your deals go smoothly and avoid any unnecessary drama.
