5 Common Contract Breaches, How to Avoid Them & What To Do If It’s Too Late

Contract breaches ranging from non-payment to non-performance can lead to commercial losses, contentious disputes, and the need for litigation or alternative dispute resolution (ADR). Companies in South Florida can avoid breaching their contracts by ensuring that they have a clear understanding of what is required. When it is too late to avoid a breach, companies can mitigate their liability risk by taking an informed and strategic approach in light of the specific circumstances at hand.

Contract breaches are among the most common reasons for commercial litigation and alternative dispute resolution (ADR). When one party to a commercial contract fails to uphold its end of the bargain, the other party may have no practical choice other than to pursue enforcement.

As a result, avoiding unnecessary breaches is essential. Company leaders also need to know what to do once a breach has occurred. Here are some key insights from an experienced Miami commercial litigation attorney:

Common Commercial Contract Breaches

Commercial contract breaches can take many different forms. Ultimately, any material violation of the terms to which contracting parties have agreed can constitute a breach—and potentially lead to litigation or ADR.

With that said, certain types of breaches are particularly common. For example, five of the most common types of commercial contract breaches are:

• Non-Payment – Payment disputes are easily among the most common types of commercial contract disputes in South Florida. Whether a party is unwilling or unable to pay, failure to make a payment when due can constitute a breach that warrants enforcement.
• Non-Performance – Non-performance can also constitute a breach that warrants enforcement. In many cases, payment and performance-related breaches will go hand in hand, and whether one party is justified in withholding payment will depend on the terms to which they have agreed.
• Deficient Performance – Along with non-performance, deficient performance is another common issue that can (and often does) lead to contentious disputes. Here too, the parties’ respective rights will depend on the language of their contract, and the scope and severity of the deficiency can play a role as well.
• Breaches of Representations and Warranties – Commercial contracts routinely include a laundry list of representations and warranties. If one party breaches its representations or warranties (or if a representation was inaccurate when it was made), this may warrant a claim for damages or other remedies.
• Restrictive Covenant Violations – Restrictive covenant violations are also common. Violations of confidentiality obligations, competitive restrictions, and restrictions on soliciting a party’s customers or employees can all potentially have significant financial and commercial consequences.

Whether (and to what extent) these breaches will warrant formal legal action will depend on the specific circumstances involved. In some cases, it may be in both parties’ best interests to negotiate an amicable resolution. In others, pursuing litigation or ADR may be the only practical option. Importantly, when legal action is warranted, taking legal action promptly could be critical for preserving the non-breaching party’s access to appropriate remedies.

Avoiding Potentially Costly Breaches of Commercial Contracts

In the vast majority of circumstances, it will be in both parties’ best interests to avoid contractual violations. To avoid breaches that have the potential to lead to contentious disputes, parties can take steps including (but not limited to):

• Ensuring that they have an accurate and comprehensive understanding of their contractual obligations;
• Addressing any ambiguities in their contracts proactively before engaging in potentially breaching conduct;
• Considering options such as seeking additional financing to allow them to meet their contractual obligations when necessary;
• Seeking additional time to comply or other concessions prior to breaching; and
• Relying on the advice of legal counsel when they have questions about their compliance obligations.

These, too, are just examples. Due to the potential legal, financial and commercial implications of committing a material breach, company leaders who have questions or concerns about their company’s contractual obligations seek legal advice before making any decisions that could lead to unnecessary adverse consequences.

What to Do if Your Company (or a Counterparty) has Breached

What if it’s already too late to avoid a breach? If your company (or a counterparty) has breached a commercial contract, it will be important to seek legal advice promptly. Company leaders must make informed decisions about how to approach commercial contract disputes; and, if taking legal action is the best approach, they will need to comply with the contract’s dispute resolution provisions (including any provisions requiring the use of ADR). Taking action promptly can often help facilitate a favorable and cost-effective resolution—and, as noted above, unnecessary delays can lead to unnecessary complications in some cases.

FAQs: Resolving Commercial Contract Disputes in South Florida

What are the remedies for a commercial contract breach in Florida?

The remedies that are available following a commercial contract breach depend on the specific circumstances involved—including, most importantly, the terms of the parties’ agreement. Generally speaking, remedies can range from financial damages to injunctions and, in some cases, specific performance.

Are commercial contract breaches subject to mandatory mediation or arbitration?

Whether a commercial contract breach is subject to mandatory mediation or arbitration also depends on the terms the parties have agreed to. While contract breaches are often subject to mandatory ADR clauses, these clauses also frequently include exceptions that apply in certain circumstances.

When should I consult with an attorney about a commercial contract breach?

If you are dealing with a commercial contract breach, we recommend consulting with an attorney promptly. It is critical to make informed and strategic decisions in this scenario, and this requires a thorough understanding of all pertinent legal considerations.

Schedule a Call with a Miami Commercial Litigation Attorney

If you need to know more about how to deal with a commercial contract breach in South Florida, we invite you to get in touch. To schedule a call with an experienced Miami commercial litigation attorney at Gonzalez Law Offices, P.A., please call 305-676-6677 or contact us online today.