Contracts establish clear expectations and obligations between parties in business and personal relationships. They are legally binding agreements that require both parties to act in good faith and in accordance with the terms of the agreement. When agreeing, both sides are expected to act honestly and sincerely, upholding the principle of good faith.

When one party fails to fulfill its contractual obligations, it can result in financial loss, damaged relationships, and frustration. Suing for breach of contract can bring significant benefits, such as financial compensation and legal enforcement of the agreement, but it also carries serious drawbacks, including high costs and potential strain on relationships. Suing a client, supplier, or business partner can permanently damage or end the relationship—especially if it is valuable.

It’s important to explore the key factors when deciding whether to file a breach of contract lawsuit, such as the potential benefits and risks, and how an experienced contract disputes attorney can help you make the best decision. Filing a lawsuit, however, may also motivate the breaching party to negotiate, often leading to a settlement before trial. So, is it worth suing for breach of contract? Here’s what you should know before pursuing legal action.

What Is a Breach of Contract?

A breach occurs when one party fails to fulfill its contractual obligations. Types of contract breaches include:

• Material Breach: A fundamental failure that prevents the contract from being fulfilled and causes significant harm. A material (or total) breach justifies contract termination and damages. This type of breach defeats the essential purpose of the contract, whereas minor issues are considered non-material breaches.
• Minor Breach: Also known as a partial or non-material breach, this involves incomplete fulfillment of contractual obligations. Some terms are met while others are not, but the overall agreement remains enforceable.
• Anticipatory Breach: Occurs when one party indicates in advance that they cannot or will not perform their obligations before the deadline.
• Actual Breach: Involves a direct failure to meet contractual terms by a specific date or deadline.

Identify the breach type and potential damages before deciding to file a contract lawsuit.

Legally Binding Contracts

A legally binding contract forms the foundation of any enforceable agreement. For a contract to be valid, it must include an offer, acceptance, consideration (something of value exchanged), and a clear intention by all parties to create legal obligations.

When one party fails to meet its obligations under a valid contract, it constitutes a breach. The non-breaching party may take legal action to enforce the contract or recover damages. Consulting a contract attorney is crucial to determine whether your agreement meets the legal requirements and to advise you on the best steps to take if a breach occurs.

Understanding your rights and responsibilities under the contract can help protect your interests and hold the other party accountable. Note that the statute of limitations sets a deadline for filing a breach of contract lawsuit, which varies by state.

Key Factors Before Suing for Breach of Contract

Consider these critical factors before filing a lawsuit:

• Contract Validity: Ensure you have a valid, enforceable contract with clear terms.
• Financial Loss: Determine whether your financial loss is substantial enough to justify litigation costs and time. Weigh legal fees and related expenses against potential recovery.
• Defendant’s Resources: Even if you win, collecting damages depends on the defendant’s ability to pay.
• Alternative Dispute Resolution: Mediation or arbitration may be less costly and time-consuming than litigation.
• Case Strength: Consult a contract attorney for a realistic assessment of your claim’s likelihood of success.
• Contract Terms: Clear, well-drafted contracts are easier to enforce in court.
• Legal Costs: Lawsuits are expensive, with attorney fees, filing costs, and evidence collection expenses.
• Small Claims Court: Consider small claims court if the disputed amount is below your state’s monetary limit (often under $10,000).

Because litigation can be uncertain, costly, and time-intensive, carefully evaluate your legal rights, the strength of your claim, and your realistic chances of recovery before proceeding. Consulting with an experienced commercial litigation attorney can provide valuable insight and guidance, helping you make a decision that aligns with your goals and minimizes unnecessary risks.

Types of Damages

When a breach occurs, the non-breaching party may be entitled to various damages:

• Compensatory Damages: Cover direct financial losses stemming from the breach, restoring the injured party to the position they would have been in.
• Consequential (Special) Damages: Compensate for indirect losses, such as lost profits or additional expenses caused by the breach.
• Liquidated Damages: Predetermined amounts agreed upon within the contract, payable in the event of a breach.
• Nominal Damages: Small amounts awarded when a breach occurs, but no measurable financial harm is proven.
• Incidental Damages: Costs incurred to mitigate losses or minimize harm.
• Punitive Damages: Rare in contract cases, these may apply if the breach involves willful, malicious, or fraudulent conduct.

A knowledgeable contract lawyer can help assess your claim, calculate damages, and develop a recovery strategy.

Resolving Contract Disputes

Not every contract dispute must go to court. Many contracts require parties to pursue alternative dispute resolution (ADR) methods—such as negotiation, mediation, or arbitration—before filing suit.

• Negotiation: Often the first and simplest method to resolve disputes amicably.
• Mediation: A neutral mediator facilitates discussion to reach a mutually acceptable resolution.
• Arbitration: Conducted outside the court system; an arbitrator hears evidence and issues a binding decision.

ADR methods are typically faster, less costly, and less adversarial than traditional litigation. A contract attorney can help guide you through these processes and, if necessary, prepare your case for court.

The Contract Case Process

A breach of contract case begins with reviewing the contract and assessing the alleged breach. The non-breaching party must prove:

1. A valid contract existed.
2. They fulfilled their obligations (or had a valid reason for non-performance).
3. The other party breached the contract.
4. The breach caused measurable damage.

A demand letter is usually the first step before filing a lawsuit. The breaching party may respond with defenses such as claiming the contract was invalid or that a breach did not occur.

If the case proceeds, an attorney will gather evidence, build your claim, and represent your interests in court, seeking remedies like compensatory damages or specific performance.

Top 3 Benefits of Suing for Breach of Contract

1. Financial Recovery

• Compensatory Damages: Recover monetary losses caused by the breach.
• Consequential Damages: Collect lost profits and other related financial harm.
• Liquidated Damages: Enforce pre-agreed sums specified in the contract.

2. Specific Performance Courts may order the breaching party to fulfill its contractual obligations.

3. Legal Accountability Litigation enforces contract terms and holds the breaching party responsible.

Risks of Litigation

• Legal Costs: Attorney fees, court expenses, and expert witness costs can be significant.
• Counterclaims: The opposing party may file its own claim, complicating the case.
• Time and Stress: Contract cases can be lengthy and emotionally taxing.
• Uncertain Outcomes: Success and collectible damages depend on how courts interpret the contract and evidence.

How Contract Attorneys Can Help

Experienced contract attorneys provide:

• Case Evaluation: Assess the type of breach, contract validity, and claim value.
• Resolution Options: Explore mediation or arbitration alternatives.
• Litigation Strategy: Build and advocate your case effectively.
• Legal Guidance: Advise whether to sue based on your goals and circumstances.

If you are facing a contract dispute, seek legal advice as early as possible. A qualified contract attorney can help you evaluate your case, understand your options, and pursue the most favorable outcome.

Our team understands the complexities of contract disputes, and we are committed to helping clients achieve the best possible outcomes.

The decision to sue for breach of contract is not to be taken lightly. By evaluating the severity of the breach, the damages involved, and the costs of litigation, you can make an informed choice about whether legal action is worth pursuing. When the breach has caused significant harm, a lawsuit can help you recover damages, enforce the contract, and protect your interests.

If you’re considering legal action for a breach of contract, RTRLAW can provide the expertise and support you need. Contact us for a free consultation to discuss your case and learn more about your options. Call us at 1-833-HIRE-RTR or email [email protected] today.