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What are the possible consequences of breaching a contract?

When two parties enter into an agreement and sign a contract, it is expected that they both will uphold their end of the bargain. Businesses often enter into contracts with employees and other businesses hoping for positive results, but, unfortunately, this doesn't always happen. In fact, in some cases, when a contract has been breached, and one party feels as though the other owes them, there are several ways for the situation to be resolved.

The following are the possible consequences of breaching a contract:

  • Restitution. One party pays the other back.
  • Punitive damages. Money that is paid by the party who breached the contract.
  • Compensatory damages. One party pays the other a sum that is equal to what was stated in the contract.
  • Liquidated damages. Money that both parties have agreed to pay should the contract be breached.

When a contract is breached, the case doesn't always head to court. Depending on what is discussed between both parties, there may be a resolution that doesn't involve a judge or a courtroom. Regardless of this being the possible outcome, if it is possible to avoid, contracts should not be breached.

A contract is created to benefit both signing parties, so it can be upsetting to one or both parties if there is a dispute. It can also be damaging for a business to face litigation over a breached contract or any other business matter. If possible, businesses should do what they can to avoid litigation. Should litigation be the only reasonable option for a possible favorable outcome, it would be beneficial to get help from an attorney to assist you with your case.

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