When You Should Pursue Litigation in Breach of Contract Disputes

Contracts form the backbone of business relationships. But what happens when one party doesn’t honor their side of the deal? Breaches of contracts can lead to financial losses, strained business partnerships, and operational setbacks. Knowing how and when to act can make all the difference.

At Cowan & Carter Law Firm, we understand the complexities of breach of contract cases. With decades of experience in civil litigation in Toronto, we offer strategic, result-driven solutions. Our legal team of experienced civil litigation lawyers in Toronto evaluates each case carefully to provide clear guidance and help you make informed decisions. 

This blog post outlines when litigation is necessary in breach of contract disputes. It highlights key factors to consider and provides actionable insights.

What is a Breach of Contract?

A breach of contract occurs when one party fails to fulfill their contractual obligations under an agreement. This failure can be minor or significant, but its impact often disrupts business operations. It could involve non-delivery of goods or services, missed deadlines, or failure to meet agreed standards. These disagreements and breaches can cost time, money, and trust.

Types of Breaches

• Minor Breach: Partial fulfillment of obligations may lead to disputes. It doesn’t impact the contract’s core purpose but may cause inconvenience or minor loss.
• Material Breach: A significant failure that affects the essence of the contract. It often makes the agreement’s purpose impossible to achieve.
• Anticipatory Breach: When one party indicates they won’t fulfill their obligations. This allows the other party to act before the breach occurs.

Common Causes of Contract Disputes

• Non-performance or delayed performance.
• Failure to meet specified standards or quality.
• Violation of contract terms or conditions.

Read Also: Types of Civil Litigation Cases

Assessing the Situation: Is Litigation Necessary?

Deciding whether to litigate requires careful consideration. An informed approach ensures you make the right decision for your business.

Evaluating the Severity of the Agreement Breach

• Distinguishing Between Minor and Material Breaches: If the breach involved in the contract is a missed deadline or minor inconvenience, litigation may not be worthwhile. However, if the breach disrupts operations or causes significant losses, legal action may be necessary.
• Assessing the Impact on Rights and Obligations: Ask whether the breach prevents you from achieving the contract’s goals. For example, if a supplier fails to deliver essential materials, your business operations may halt entirely.

Exploring Alternative Dispute Resolution (ADR)

• Mediation and Arbitration: Consider mediation or arbitration for a collaborative solution where both parties negotiate with the help of a neutral mediator. Arbitration, on the other hand, offers a faster resolution with a legally binding decision.
• Benefits of ADR: ADR is cost-effective and less time-consuming. It also helps preserve relationships with clients, suppliers, or partners by avoiding the hostility of court battles.

Considering the Costs and Benefits

• Financial Implications: Calculate the potential recovery amount against the legal fees and court costs. Pursuing litigation for minor damages may not be financially sensible.
• Time Commitment and Disruptions: Determine if your team can manage the workload while navigating a lengthy court process. Litigation often requires significant resources.
• Likelihood of Success: Review the strength of your evidence, such as written contracts and communications. A strong case increases the chances of achieving a favorable verdict.

Read Also: What is a Civil Litigation Lawyer

Indicators That Litigation May Be Warranted When Contract Disputes Arise

Certain situations demand stronger action, and litigation might be the best or only choice.

Below are key scenarios where pursuing litigation becomes necessary:

1. Significant Financial Losses

• Monetary Impact: If the breach results in considerable financial damage, litigation can help recover these losses. For instance, if a partner fails to deliver on a multi-million dollar deal or a contractor’s non-performance derails a major project, court intervention may be required.
• Evidence Preparation: Document all financial losses, including canceled deals, revenue shortfalls, and additional costs incurred due to the breach. Accurate records strengthen your legal case and demonstrate the impact of the breach.

2. Irreparable Harm to Business Operations

• Operational Disruptions: A breach that halts or severely disrupts your business may warrant legal action. For example:
  • A supplier fails to provide critical components, leading to production delays.
  • A service provider’s non-performance impacts your ability to meet client deadlines, resulting in reputational damage.
• Long-Term Impact: If the breach compromises your business continuity or relationships with key stakeholders, pursuing litigation helps address the harm and provides necessary remedies.

3. Unsuccessful Attempts at Alternative Dispute Resolution Processes (ADR)

• ADR Limitations: Mediation and arbitration are often less expensive and quicker than litigation. However, if alternative resolution methods fail, it’s a clear signal to escalate. Common reasons ADR fails include:
  • The other party refuses to cooperate.
  • Disputes over key facts or damages remain unresolved.
  • The breaching party does not comply with an arbitrator’s decision.
• Strengthen Your Case: Keep a record of all ADR efforts, including correspondence, meeting notes, and agreed terms. This shows the court that you made reasonable efforts to resolve the issue before filing a lawsuit.

4. Need for Legal Precedent or Enforcement

• Setting a Precedent: In some cases, litigation may be necessary to establish your legal rights and prevent future breaches. This is common in business-to-business relationships where contract enforcement protects broader operational interests.
• Enforcement Challenges: If a breaching party refuses to fulfill their contractual obligations, litigation may provide binding remedies. A court’s judgment can include financial compensation, specific performance, or other enforceable actions to ensure compliance.

Steps to Take Before Initiating Contract Dispute Litigation

Before filing a lawsuit for breach of contract, it’s crucial to take certain steps to build a strong case and explore resolution options. 

1. Document the Breach

• Collect Evidence: Gather all relevant documents to support your claims. This includes contracts, email communications, text messages, invoices, and meeting notes.
• Chronology of Events: Create a detailed timeline of what happened, starting from when the contract was signed to when the breach occurred.
• Prove Impact: Document any financial losses, missed opportunities, or other damages caused by the breach. Use invoices, canceled contracts, or receipts to quantify the harm.
• Photographs or Screenshots: If applicable, use visual evidence such as screenshots or photos to validate your claims, especially for service or product-related breaches.

2. Consult with a Contract Dispute Lawyer

• Seek Professional Advice: Contact an experienced business litigation attorney to assess the strength of your case. They can help you understand your legal rights and potential remedies.
• Case Evaluation: A contract lawyer will analyze the breach, review the contract, and identify any clauses that may influence the outcome, such as dispute resolution terms.
• Avoid Mistakes: Legal counsel ensures you follow proper procedures, avoid missteps, and protect your rights and legal position from counterclaims.

3. Send a Formal Demand Letter

• Notify the Breaching Party: Draft a demand letter outlining the breach, how it violates the contract, and the damages caused.
• Request Resolution: Specify what you expect—compensation, performance of the contract terms, or other remedies—and give a deadline for the breaching party to respond.
• Maintain Professional Tone: Keep the tone clear and professional. Avoid emotional language as this document could become evidence if the case proceeds to court.
• Proof of Delivery: Send the letter via certified mail or email with a read receipt to confirm delivery.

4. Review Contractual Obligations

• Check Your Compliance: Ensure you have fulfilled all your obligations under the contract. If you failed to meet your own terms, the breaching party might use it as a defense.
• Understand Key Clauses: Look for conflict resolution clauses, arbitration agreements, or any conditions precedent to litigation.
• Verify Deadlines: Confirm that your claim is within the statute of limitations. In many jurisdictions, you have a limited time to file a breach of contract lawsuit.

Read Also: Stages of Civil Litigation

How Cowan & Carter Law Firm Can Assist

When dealing with a breach of contract, having experienced legal representation is crucial. Cowan & Carter Law Firm offers the expertise and personalized litigation services you need to navigate the complexities of litigation effectively.

Our civil litigation firm in Toronto has years of experience handling complex contract disputes. Our team has successfully represented clients in a wide range of industries. We understand the nuances of contract law and leverage this expertise to deliver practical, result-driven solutions.

Cowan & Carter is dedicated to achieving the best possible results for our clients. We fight for your interests with professionalism and persistence. Our team provides guidance from the initial consultation to the resolution of your case.  We work closely with you, ensuring your questions are answered and your concerns addressed at every step.

Conclusion

Breaches of contract can have serious financial and operational consequences. Knowing when to pursue litigation is essential for protecting your business interests. Key considerations include evaluating the severity of the breach, exploring alternatives like ADR, and understanding the costs and benefits of litigation. Taking the right steps, such as documenting the breach and consulting legal counsel, can significantly strengthen your case.

Professional legal guidance is vital in civil litigation Toronto. Cowan & Carter Law Firm has the experience, expertise, and dedication to help you achieve a favorable outcome. Call us today for a consultation and let the best civil litigation lawyers in Toronto assist you in resolving your breach of contract disputes with confidence and precision.

DISCLAIMER: Please note this article is not legal advice. You should always consult a lawyer for legal advice regarding your particular situation. The article is not necessarily a complete and/or accurate explanation of the law – it is an article of a general nature.

Published on December 4, 2024