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A contract was breached. What happens now?

Business, organizations and individuals enter into contracts all of the time, and when they do so, the parties involved may not fully realize the ramifications of the deal to which they have agreed. Breaking, or "breaching," the contract in any way can lead to the other party (or parties) in the deal seeking financial or performance retribution from the breaching party.

A breach of contract occurs when one party fails to fulfill a part of the contract. Given the financial ramifications of part of a contract not being fulfilled, it is no wonder why the victimized business, organization or individual would seek justice. Once it is established that a breach of contract has occurred, though, what are you supposed to do?

A lawsuit is usually the next step after a contract is breached, though if the amount is low enough, the parties could settle the matter independently or they could take it to small claims court.

If that doesn't work, the matter will go to civil court. If the breaching party is found liable for their inaction based on the terms of the contract, there are three types of "remedies" that a judge could utilize. The first is damages, which are financial penalties the breaching party would have to pay the victimized party (or parties) involved in the contract.

The second option is "specific performance," which is just a court mandate forcing the breaching party to fulfill their end of the contract.

Third and finally is cancellation and restitution. If the contract is cancelled, then both parties are relieved of their duties as outlined under the contract. Restitution would mean that the breaching party has the same obligations as before the breach occurred.

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