Complying with the terms of a contract should be a top priority for any Texas entrepreneur. Failure to do so can lead to bitter legal disputes, loss of business and extensive financial penalties, which can threaten a company's bottom line and reputation.
In order to protect yourself in contract disputes citing breaches (or avoid them altogether), understand that the following four elements should be present in any case involving an alleged breach of contract.
- There is a contract to breach in the first place. If there are claims involving fraud, unconscionability, duress or violations of public policy, a contract may not even be enforceable. As such, "violations" would not be grounds for a legal claim.
- The breach is material. If a breach is minor and does not impact fulfillment of the terms, there may be nothing to gain from a lawsuit. However, a material breach that is major and/or prohibits the contract from being fulfilled can spark legal action.
- The breach leads to direct and/or consequential damages. This might include loss of business, extra expenses required to address the breach, and other financial losses stemming directly or indirectly from a party's violation.
- The breach occurred within the last four years. In accordance with Texas contract statutes, you must file a breach of contract claim within four years of the breach. This is true regardless of when you learned of the breach.
If all these elements are in place, there may very well be grounds for legal action. However, it can be difficult to tell whether these and other elements are truly in place if you are unfamiliar with contract laws in Texas.
This is why any business owner with specific questions or concerns regarding potential breaches of contract should consider talking to an attorney. With the experience and advice of an attorney by your side, you can make informed decisions about how to proceed in situations involving contract disputes.