Photo by: Fanboy30 

Well, contracts are good topic that almost all nonprofits will have to deal with.  So, today I will talk about what happens when a legal contract has been broken.  Now when two parties sign a legally binding contract and one of the parties does not follow through with their part of the deal, you have what is known as Breach of Contract.  Now when this happens, the opposing party will sue or will want to sue the party who broke the deal.  Now when this is the case, there are a number of options that will arise for settlement.  Many involve the courts which can be costly but some do not.

1) Negotiated Settlement:  This is when the two parties themselves figure out a solution that works.

2) Arbitration:  When this is used to solve the problem, both parties must abide by the decision of the neutral third party that is brought it.

When a decision can’t be made by using either of these situations, the issue will most likely end up in court and here are a number of solutions the judge could come up with.

3) Compensatory Damages: These are court awarded damages that put the plaintiff in the same financial position as if the contract had been performed.

4) Consequential Damages: Court awarded damages in which the faulting party knew would arise from the breach of contract. An example of this would be the loss of business suffered by the plaintiff when the defendant knew that failure to deliver the equipment would cause the loss.

5) Liquidated Damages: These are damages that are what should be paid when the real damages are likely to be uncertain.

6) Nominal Damages: A small amount, usually a $1, that is awarded by the court to a plaintiff who suffered no financial injury.

7) Rescission: This is where the court requires each party to return the consideration (value) given the other.

These are your options and the many options of what can happen when you have a breach of contract experience.  It is best to try and solve your problem with a negotiated settlement or arbitration to save you both money and time.  But, if things can not work out, you will most likely end up in court.