If your business is involved in a contract dispute with another party you believe did not live up to its contractual obligations, the first step to resolving the dispute is to provide a notice of breach. This notice will explain why you believe a breach exists and provides a list of actions that must be taken to resolve the issue or end the contract.
Here’s an overview of how to draft a notice of breach and the steps you can take following its delivery to resolve the situation.
- Include the date: The notice should create a clear record as to the date on which the breaching party was informed of the breach. If your dispute goes to court, this date is important evidence.
- Analyze the notice clause: Many business contracts contain notice clauses, which include contact information for each party to be used for communication of official notices. Failure to follow procedures laid out in this clause for delivery of official notices, such as a notice of breach, could affect your rights as the case proceeds.
- Thoroughly describe the breach: The notice should include information about which aspect of the contract was breached. One of three things must have happened for the situation to contact a contract breach: a) the other party failed to perform according to the terms of the contract, b) the other party said it will not continue to perform its obligations in the future, or c) the other party conducted itself in a way that made it impossible for your business to live up to its end of the contract. Be thorough in describing which part of the contract was breached and how.
- Note if it is a material breach: A material breach is an action by a party that essentially destroys the contract’s value and purpose. These are much more serious types of breaches that typically have larger penalties and stricter consequences associated with them.
- Offer a solution: It might be too late to actually fix the problem, but your notice of breach can still include a possible “cure” to the damages that have been caused already.
- Try to work out a deal: Either before or while you send a notice of breach, you should talk to the other party to attempt to work out a solution that will keep you out of the courtroom. You can formally end the contract, but this will require a separate agreement terminating the contract and should involve your attorneys.
- Head to court: If you are unable to work out a deal with the other party or the other party refuses to comply with the solutions suggested in your notice of breach, litigation will likely be necessary. Your attorney can advise you with regard to how best to proceed according to the circumstances of your case.
For more information about the steps you should take if your business has been the victim of a contract breach, contact a skilled U.S. Virgin Islands business planning attorney.
Mark A. Kragel is a senior attorney in BoltNagi’s Civil Litigation Practice Group. BoltNagi is a full service business law firm serving the U.S. Virgin Islands.