As a business owner, when you enter into a contract, you expect the other party to carry their end of the bargain. However, this is not always the case, and the other party may breach the contract.
It’s not an uncommon situation, but after it happens, you may be unsure of what options exist to remedy the situation. First, it’s important to understand what a breach of contract is, and then ask yourself what you should do next.
Breach of contract
Though it leans on self-explanatory, a breach of contract can take many forms and range in severity. By definition, it describes a situation where one party failed to carry out his or her responsibilities as outlined in a contract.
Some examples of a breach in contract include:
- A party’s refusal or inability to complete a task by the due date
- The party completed the task by the due date, but it is incomplete
- The received material was incorrect
- A party’s failure to pay on time
In Illinois, both written and oral contracts are valid and enforceable. However, oral contracts are harder to prove a breach of contract, so it is better to put it in writing.
If the other party breached the contract, you may be able to sue for damages. However, it’s important to remember that you can only receive compensation for the portion of the contract that was broken. For example, if the contract agreed that goods would be delivered by a certain day and they weren’t, you would only be eligible to seek compensation for that specific part of the contract.
Statute of Limitations
It’s also important to keep in mind that there is a statute of limitations for contract breaches. This means you’re restricted in the amount of time you have to seek compensation for damages. In Illinois, the statute of limitations for written contracts is 10 years. For verbal contracts, it is 5 years.
Depending upon the severity, a breach of contract can have significant financial and material effects on your business. Knowing what options exist to remedy any damages can help you in case a breach of contract occurs.