How to deal with contractual breaches.
Updated: Jun 21
Well-written contractual provisions make the difference between having an ace or a hassle. Use the right contracts and you will have effective remedies if your contractual partner does not fulfill their obligations.
Contracts are key elements to every business. No company can operate without them, nor should they. Ultimately, good contracts ensure that you are delivered the expected results, especially when the parties reach disagreement.
The ones drafted more poorly might end up before a judge. Headaches occur mainly because companies use contracts borrowed "from the internet", from friends or from specialists without any legal training. While these might do their job on the spot, they turn into your worst nightmare as soon as misunderstandings arise.
Whatever, you are now in the situation where your partner breached the contract, whether it is well written or not. What is to be done?
1. Establish the contractual breach correctly
The first step is to determine exactly which obligations your partner has failed to meet.
Some of the most common breaches are:
payment delays;
late delivery;
breach of quality standards for the delivery of goods and services;
disclosure of confidential information.
Start by reviewing the contract in search for specific clauses related to the terms and conditions for delivery of goods or services by your contractual partner. If your contract lacks clear information on this, you may need to prove the breach using some other means: previous correspondence between parties, scope of contract, practices, industry norms, or even an expert opinion.
2. Try to resolve the situation amicably
Start by soft means, such as email or phone. Communicate to your contractual partner the contractual breach and ask them to remedy it within a certain term. If your conversation takes place by phone, send an email immediately afterwards summing up the conversation. What is written, cannot be erased.
If your contractual partner does not voluntarily perform the obligation, resort to more aggresive remedies. It is not yet time to contact a lawyer or specialist, but it might work to send a written notice, with confirmation of receipt or through a judicial officer. For debt recovery, use this model.
There are good chances for this to work precisely for those partners who wish to avoid further complications with court cases or hiring lawyers.
3. Assess your legal remedies
If amicable approaches fails, you can go to courts of law or enforcement officers.
Each type of contractual breach may entitle you to one or more types of claims (called, procedures). For example, for debt recovery, you can use: low value claims, payment orders, contractual liability claims, application in insolvecy procedure, and many others.
Be careful to the following:
not using the correct procedure, can turn into loss of your rights. Under Romanian laws, judges dismiss as inadmissible those claims that do not fit the factual background. For example, you can use a fast debt recovery procedure when you have written documents, but not when the debt’s existence is challenged.
exceeding the statute of limitation leads to loss of rights. Unfortunately, a very high percentage of claims are annually rejected by judges as the entitled persons do not observe deadline requirements. All legal procedures are time barred and not even the best of lawyers can save you if it is exceeded.
Then, each remedy available to you comes with advantages and disadvantages. Some are faster but have stricter admisibility conditions. Others are slower but much more permissive.
Choose the right one:
based on the possible outcome. In any process, the plaintiff asks the judge for something, and the final decision is rendered accordingly. The judge cannot give you something you did not ask for.
Of course, it's a bit different from everyday life where you simply say "I want it", as in law it is the chosen procedure that tells the judge what to give or not. For example, a contractual breach can lead to the termination of a contract for breach (in which case the contract ceases from now on), or to its annulment (in which case the parties must return to the situation before the contract was concluded), or to enforcement (the contract remains valid, but one party is obliged to execute).
based on costs. Every procedure brought before a judicial authority requires the payment of a court fee, which can assume one of two forms: a fixed fee or a fee proportionate to the value of the claim being pursued. In addition to these court fees, individuals seeking legal representation may also incur costs associated with engaging the services of legal professionals, should they elect to do so.
based on duration. We included this following logical reasoning. However, in practice, the duration of resolving a legal process is contingent upon an element of chance. Some judicial instances or divisions may experience higher caseloads, resulting in scenarios where urgent proceedings extend over the course of one or two years.
Ultimately you decide on the procedure to follow considering the facts and background of your situation. For specific advice, reserve a consultation, and you’ll get the answers.
4. Establish the loss
The loss signifies the harm suffered as a result of your partner's breach of contract. This encompasses both direct losses, such as the fees for services rendered, and losses stemming from your selection of the specific contractual partner – or the potential earnings that were foregone (for instance, if timely payment had been received, the funds in your account could have accrued interest). You must prove both the existence and the value of the loss.
The burden of proof is yours. You can use written documents (such as invoices, delivery documents, etc.), expert opinions (if an expert assesses, for example, the value of your work), witnesses, or other evidence provided by law.
Failing to establish the value of the loss can lead to a reduction in your likelihood of achieving a favorable outcome, even in instances of clear contractual breaches. Well-drafted contracts often incorporate diverse provisions aimed at facilitating the definition of what constitutes a loss, thereby mitigating unexpected complications in the event of contractual violations. This underscores the importance of approaching contract signing with due diligence.
There is another scenario: when upon concluding the contract, the parties agreed on the value of loss caused by certain contractual breaches. To check if you benefit from this situation, look for a clause like "In case the party does not fulfill obligation X, then they will pay damages in the amount of Y" or called "penalty clause" or "penalty." Did you find it? You've just made your job easier. You won't have to prove the amount of loss - it will automatically be the one agreed upon by the parties under that clause.
5. Don't Forget...
When you initiate any action against your contractual partner, consider potential repercussions on long-term business relationships. There are instances where preserving a business relationship holds greater intrinsic value than securing an immediate victory in a courtroom.
Furthermore, how you approach the issue can have a major impact on the contract. Regrettably, a number of professionals, driven by their financial interests, adopt excessively aggressive or definitive strategies when addressing relatively commonplace issues.
All in all, we advise you to follow the steps above and, if you engage a lawyer, balance all the advantages and disadvantages of the chosen strategy.
In any case, prevention stands as the most efficient solution, and that's why the quality of the contracts you use should become a priority.
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