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The Importance of Contracts

Written on April 11, 2017

Contracts play a pivotal role in ensuring that companies, employers, employees, and third party service providers are compensated fairly for their goods, labor, or services. For instance, in the event that an agreement is breached, the existence of a written contract can help protect the non-breaching party from suffering economic loss. Forming or enforcing a contract can be difficult and time-consuming, so if you have questions about a contract that you entered into, please call an experienced business law attorney who can protect your interests.

Relief Offered for Failing to Fulfill a Contract

When a party to a contract fails to fulfill agreed-upon obligations, he or she can be held accountable for the breach if there is an existing record of the contract. Breaches could include:

  • A failure to perform a contractual duty on time;
  • A failure to perform in accordance with the terms of a contract; or
  • A failure to perform at all.

Fortunately, even when someone fails to abide by an agreement, contract law offers a form of relief to non-breaching parties in the form of damages. The most commonly awarded damages include:

  • Compensatory damages, which are intended to place the non-breaching party in the position that he or she would be in had the breaching party fulfilled his or her end of the contract;
  • Punitive damages, which go above and beyond compensatory damages and are intended to punish the breaching party and discourage similar behavior in the future;
  • Nominal damages, which are awarded when a breach occurred, but the other party did not actually experience any monetary loss; and
  • Liquidated damages, which are included in the contract when it is formed in the event that one of the parties fails to uphold its end of the bargain.

In some rare cases, courts are also willing to order the breaching party to perform the service or exchange as described in the contract. This is known as specific performance and is usually only implemented when the subject matter of the agreement is rare or unique because damages would not be sufficient to place the non-breaching party in the position that he or she would have been in had the other party complied with the terms of the contract. For example, if a person decided to sell a piece of property and later backed out of the deal, a court would be willing to order the owner to go through with the sale. This is because real estate is considered to be unique, since there are no two pieces of property that are exactly the same. However, courts are generally reluctant to order specific performance and if money damages would adequately compensate a non-breaching party, the court will most likely order compensatory damages instead.

In some cases, non-breaching parties are permitted to cancel the contract itself, which voids it and relieves the parties of any obligation. When a non-breaching party has already provided a benefit to the other party, he or she can also receive restitution.

Contracts are legally enforceable and the consequences of failing to comply with the terms of an agreement can be severe. This helps encourage those who enter into agreements to abide by the set terms. It also provides those who enter into a contract with the knowledge that they can collect damages for a breached contract.

Contract Standards

Written contracts also ensure that businesses make valid and enforceable agreements. For instance, in order to be considered a valid contract, an agreement must include an offer by one party and an acceptance by another. Additionally, something of value must also be given in return for the promise of the contract’s fulfillment. The agreement must also clearly lay out the terms of the exchange specifically enough that they could be enforced by a judge at a later date. Although a contract does not necessarily need to be written, it is much more difficult to enforce an oral contract than one that is recorded in writing.

By complying with these standards, the contracting parties are more likely to have a clear understanding of the terms or conditions of an agreement and so avoid expensive misunderstandings. This in turn can provide both parties with security and peace of mind. For example, an employment contract should clearly set the terms agreed upon by employers and employees regarding specific duties, responsibilities, and payment. Employers must also comply with the wages and benefits promised in the contract. This protects employees from being taken advantage of and also keeps employers from being falsely accused of wrongdoing. These types of clear cut contracts can help the parties avoid litigation resulting from confusion and breaches, which can also save the parties’ a substantial amount of financial resources. Furthermore, when individuals or entities are aware that there will be severe consequences for breaching a contract, they are often discouraged from entering into contracts that they do not intend to honor.

Forming a valid contract at the outset of a business or employment relationship also helps ensure that smaller companies and employees are shielded from dishonest and unscrupulous business partners and are protected by the language of the contract. Alternatively, contracts can also protect businesses from false claims made by employees, as the employer can turn to the explicit language of the contract to refute certain allegations.

Contact an Experienced Business Law Attorney Today

Contracts provide businesses and individuals with peace of mind as well as legal recourse in the event of a breach. Unfortunately, interpreting and enforcing contracts is difficult and many people are not even aware of the protections offered by contracts. To ensure that you are able to refute false claims or collect compensation from a breaching party, please contact Clearwater Business Law by calling (727) 785-5100. You can also reach a member of our legal team by sending us a brief message containing a short description of your case as well as your contact information. We look forward to helping you with your contract needs.

TESTIMONIALS

I strongly endorse Andrew Mongelluzzi. He is a very skilled and able business attorney focused on customer service and results. On the front end, Andrew deftly advises new businesses on organizing properly, acquiring necessary licenses, contracting with vendors & customers, and dealing with various compliance issues that may arise. On the back end when things go south, Andrew counsels and navigates businesses through complex commercial disputes and aggressively represents them in negotiations, mediation, arbitration, and in litigation so that businesses can legally move on and get back to business. Andrew’s ability to identify legal issues and approaches to resolve business-related issues is a strength that I have learned from and professionally relied upon in approaching the business matters and cases that I handle. I regularly refer business to Andrew knowing that he will diligently represent his business clients and their best interests.
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We hired Andrew to help us when our insurance company denied our claim when water and sewage damage completely destroyed our Florida Condominium. Even though Andrew made several phone calls and wrote an initial letter, the company continued to deny our claim. He was persistent and continued to help us negotiate with the company until we finally received a fair monetary settlement. He was always quick to respond, helpful, and courteous when working with us. I would recommend him to anyone who is fighting an unjust insurance settlement.

- Harvey

Andrew has represented my business for several years in the area of corporate law, business transactions, collection matters, contract matters, employee disputes, and more. He has always been more than approachable, accommodating and understanding. His approach is not like other lawyers in that he deals with you on your level and is able to incorporate his legal strategies into our business plan/model; instead of allowing lawsuits to takeover the business. Further, his education and practical experience in the business world equates to a valuable understanding of my business.

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- Client

Andrew is very thorough defining the outcome expectations. In my case, it was setting up a new corporate entity. He advised me on the most beneficial option and he then executed on that path. Andrew is a very pleasant person to work with. He is determined, skilled and committed to his client’s success.

- Gil Pinney

Andrew helped me through a difficult situation with American Express and we won the case. A great job by Andrew! He also helped me with T&C’s in my company. I would recommend Andrew highly as an attorney.

- John Sams

As a business owner for 12 years I have seen my fair share of ups and downs. Some of the downs would include landlord/tenant disputes and creditors that may have not been fulfilled to agreement. Andrew has met both of these situations for me in a timely, positive, and affordable manner.

- Rich Mattes

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