How Contract Management Systems Can Detect a Breach of Contract

Contracts are formal agreements to exchange products or services between parties. These formal promises shape the business’s daily operations. Besides being legally binding, they set the tone of the parties’ working relationship. In other words, they serve as the business’s foundation. For this reason, knowing the basics of breach of contract is crucial.

What Are the Basics of Breach of Contract?

Contracts are usually lengthy, detailed, and they contain as much information as necessary to set clear terms of the working relationship between the parties. However, when these conditions aren’t met, it can result in a breach of contract and legal action. 

Contract breaches generally come in four types. They provide distinctions and put a breach of contract into perspective. A minor breach means there is a broken condition, but the core elements of the contract have been upheld, while a material breach involves one party violating a core condition of the contract. 

A fundamental breach allows the non-breaching party to terminate the contract and even sue the other party for a major violation. An anticipatory breach, on the other hand, means a party violated a condition in advance of specific timelines.

Does Every Breach Result in Voiding the Contract?

Getting out of a commercial contract is not easy. Just because one party does something wrong does not necessarily mean the agreement will automatically fall apart. While a minor breach must be taken seriously, voiding the contract usually takes a deliberate action or serious error on the part of one party.

What Are the Resolution Methods?

Keep in mind that going to court is not the only way to address a breach of contract. In fact, a clause in most commercial contracts provides both parties with important guidelines by outlining what happens in the event of a dispute. This is why despite things not going according to plan, most businesses intend to uphold the agreement. They communicate and find a resolution that is acceptable to both parties.

How Do Businesses Monitor Contracts?

Breaches of contract may seem straightforward, but the line is often blurry between minor and major breaches. To prevent disputes from happening in the first place, using contract management solutions is beneficial. It is not just merely a database of contracts; it can also be fully integrated into other operational systems to ensure both parties uphold their contractual obligations. Here are the other reasons every business must invest in a contract management system:

  • It saves businesses’ reputation
  • It prevents businesses from paying costly damages and legal fees 
  • It prevents businesses from potentially entering into a dispute
  • It keeps businesses’ working relationships on track
  • It upholds strong business relationships
  • It identifies how existing agreements offer business value
  • It manages and reduces risk
  • It pursues appropriate breach remedies when necessary

Conclusion

The way businesses uphold their responsibilities in a commercial contract and their actions when the other party fails to meet their obligations say a lot about how they do business. Since not every business owner has the time to continuously monitor their contractual obligations, you must take advantage of technology to ensure you are holding up your end of the deal. 

Get the right high-level tools to ensure contractual compliance and prevent a breach of contract with our software. Anapact is a contract management tool that helps businesses stay on top of their legal obligations. Contact us to request a demo!

About The Author

Louis Balla

The opportunity to solve organizational and mission-critical issues for clients through technology and consulting drew Louis to Anapact CLM. Louis and the team bring years of experience working with software solutions and industry-leading practices that help their clients get the most from their software investment.