Breaches of contract in Maryland

Companies in the business of buying or selling goods often contract with one another using sales contracts. In such a contract, a seller will agree to provide a specified material or item by a certain date. In return, the buyer will agree to pay money, either as a lump sum payment or in agreed-upon installments. Although sales contracts may seem routine, they are legal documents and as such, may lead to negative consequences in the event a business violates their provisions.

When a contracting party breaches a sales agreement, the breach may be minor or material. Minor breaches are those that can easily be cured and most likely will not lead to litigation. Material breaches, however, are breaches that are so severe that the contract itself is broken. A material breach may lead to the other company’s filing a breach of contract lawsuit against the breaching party.

Litigation can be long and expensive. If the plaintiff prevails, the defendant company may be ordered to pay consequential, incidental or even punitive damages. Since disputes often arise, businesses sometimes include an arbitration clause within the original sales contract. Arbitration clauses can be included in order to forbid either party from suing the other, to mandate the parties handle any disputes through arbitration and to get an agreement that any decision made by an arbitrator will be binding on both contracting parties. Arbitration is generally less expensive and faster than litigating issues in court.

When a business is preparing to enter into a contract with another, it is important for them to make certain the sales contract they will use clearly defines the expectations of both contracting businesses in order to reduce the likelihood of a contract dispute. However, if a breach does occur, an attorney may provide helpful advice regarding how to handle the issue.

Source: Houston Chronicle, “What Can Happen if You Breach a Sales Contract?“, Lee Nichols, December 07, 2014

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