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by Mike
- July 22, 2025
Contract breaches are all too common in the financial world. Whether intentional or unintentional, they impose a significant financial impact on the party that still respects the contract. If you are a party to an agreement that another party has breached, those damages may be devastating.
Under U.S. law, your first duty is to mitigate any damages you suffer, even if that involves breaching the contract yourself. Additionally, you should take the following six steps to protect your interests:
1. Act Swiftly and Secure Evidence
If you are accusing another party of violating a contract, you need to gather as much evidence that shows the contract has been breached as possible. A few examples of this type of evidence are:
● Copies of the contract
● Records of communications with all parties involved
● Receipts and invoices
● Records of all activities that both sides have performed
Regardless of its form, your evidence will be critical in the remaining steps. You should preserve it both physically and digitally, ensuring it is in a format that allows for easy sharing with an attorney.
2. Understand the Contract and Identify the Breach
Hopefully, you were being advised by legal counsel from the moment you entered the contract. But if you weren not, you should obtain legal counsel immediately. Your lawyer will help you examine the contract and use the evidence you previously secured to determine the exact terms that were breached.
3. Assess the Potential Damages
There are several types of damages you can suffer from a contract breach, such as:
● A loss of income
● Repair or replacement costs
● A loss of reputation
● Punitive damages for an intentional breach
Your attorney will help you assess both the actual and potential damages incurred as a result of the breach. The more accurately you can determine the value of these damages, the better you can argue for compensation if you eventually take legal action.
4. Attempt to Salvage the Agreement
While the previous steps will help you in the event of legal action, they can also help you salvage the agreement.
By presenting the other party with evidence of their breach, the precise actions that caused the breach, and the potential damages, you can make a strong case for how you were wronged. And that sort of groundwork puts you in a strong position to renegotiate the contract or to require the other party to correct their actions.
If the breach was accidental, the information you provide will help put the consequences of the other party’s mistake into perspective and assist them in pursuing corrective actions. Typically, your business will suffer less financially if you successfully salvage the agreement instead of taking legal action.
5. Take Concrete Steps to Mitigate Losses
Minimizing your losses is legally required and essential for the financial health of your business. Depending on the circumstances, mitigating your losses may involve obtaining similar services from another supplier, issuing a recall for faulty goods, or halting work on a project.
6. Pursue Legal Action if Necessary
If all else fails, you may need to pursue legal action to obtain recompense for your losses from the contract breach. Consult with a business litigation lawyer before making any decisions, as they will explain your legal options and guide you through the process efficiently.
Following the Above Steps May Prevent a Disaster
Though it may sound obvious, a contract breach should be taken seriously. You need to secure evidence carefully, discuss the law with an experienced attorney, and understand the nature and consequences of the breach before taking any concrete action. Armed with the proper preparation and respect for the consequences of a breach, you may be able to save the contract.
But whether you attempt to salvage your contract or pursue litigation, you should include a business litigation lawyer in your decision-making process. They will help you make informed decisions and decrease your likelihood of making mistakes that could be financially devastating.