I want to sue for breach of contract. How do I get started?

If a customer, vendor, supplier or other company has breached its contract with you, it can be tempting to file a lawsuit immediately. It’s a matter of principle that a contract breach should not be tolerated, and you should receive compensation for your losses and trouble, right?

The first thing you should do, however, is have your contract and the alleged breach evaluated by your business attorney. This is to ensure that you actually have an enforceable contract and a legitimate claim of a material breach.

Assuming you do, you may want to try resolving the situation outside of court. This is generally less costly and time consuming than going to court, and courts generally want to see companies try an informal resolution before they litigate.

Informal attempts at resolution include, for example, negotiation. You or your attorney can contact the breaching party and attempt to work out a solution. Or, you could try mediating the dispute or bringing it before an arbitrator.

When attempting to resolve a dispute out of court, try to be as reasonable as you can. This could be important later, if you must go to court.

What remedies are available for breach of contract?

Depending on whether you are able to resolve the dispute out of court or need to head to litigation, there are several options:

  • Monetary damages
  • Cancellation and restitution
  • Specific performance

The most common form of remedy is compensatory damages, which are available for whatever you lost as a result of the breach. These losses include any out-of-pocket expenses you had already paid, along with the lost benefit of your bargain. In general, if a loss was foreseeable and resulted from the breach, you can attempt to seek compensation for it.

Your contract may specify what damages you are entitled to. This is called a “liquidated damages” clause.

In addition to compensatory or liquidated damages, you may be allowed to seek punitive damages if the breach was especially wrongful. Punitive damages are meant to punish wrongdoers.

If you prefer, or if the other party can no longer perform at all, you may seek to cancel the contract in exchange for restitution of your actual losses. This involves calculating what you have lost as a result of the breach and ending the obligations of the contract.

Finally, there may be the option of specific performance. This is only available from a court, but you could also negotiate for it. Basically, this remedy is that the breaching party must do whatever is required to fulfill the contract. It is applicable when the subject matter of the contract is rare, valuable or unique and damages will not suffice.