Willcox, Buyck & Williams, PA Blog

Friday, December 29, 2017

Business Contract Performance - When is it a Good Idea to Breach?

Business Contract Performance - When is it a Good Idea to BreacBusiness relationships and undertakings are formalized with contracts. These contracts may be written or oral, but most complex business agreements are reduced to writing for obvious reasons. Business owners agree on the terms of the contract to ensure seamless performance by all parties to the contract. However, there are times when performing the contract is detrimental to the business or simply impossible. Does this mean the business owner’s hands are tied? Not necessarily.

There are instances where it is a good idea to breach a contract. Before doing so, however, it is best to consult a South Carolina contracts lawyer to comprehensively evaluate all possible legal scenarios.

When it is a Good Idea to Breach a Contract

  1. Efficient breach

    The idea behind efficient breach is that a party should be allowed to breach a contract and pay resulting damages if it would be more economical than actually performing the contract. There are times when a business owner is tempted to breach a contract because it would be more profitable or economically efficient to do so than actually performing the contract.

    If the economics of performance are unfavorable, efficient breach allows the business owner to choose the most economically feasible path while compensating the victim, essentially putting him in the position he would have been if the contract were performed.

  2. Contract is illegal

    An illegal contract is unenforceable and performance may land the business owner in legal trouble. For example, a contract for the sale of illegal goods or the provision of illegal services violates the law and if performed, could give rise to criminal charges. Breaching it is definitely a good idea.

  3. Contract obtained by fraud

    A contract that is obtained by duress, undue influence, lies and fraud is invalid since the party with power gains an undue advantage to force the other into an unfair or unconscionable contract. There is no true consensus or good faith, which invalidates the contract.

  4. Estoppel

    If one party excuses the other from performance of a contract, the other party can rely on that excuse. The party making the excuse will be held to his word and estopped from claiming breach.

  5. Lack of capacity to contract

    If any of the parties to the contract lacks capacity to contract (because they are underage, of unsound mind or for any other reason), the contract is voidable. A voidable contract, once rendered void, is legally unenforceable. Should this happen, it could cause significant losses to a business owner who had relied on it.

  6. Contract contained a mistake

    If the contract contained a mutual mistake or a material unilateral mistake that the other party knew or should have known about. This will render the contract voidable.

While nobody enters into a business contract with the intention of breaching the terms, there are instances where performing the contract would ultimately cause harm to the company. In these instances, breaching the agreement may be the best option for your company and shareholders.

If you are contemplating a breach of contract, you have several legal options available. Contact Willcox, Buyck & Williams, P.A. today for a consultation.


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