Commercial litigation often revolves around contract breaches or allegations that a company has not upheld its contractual obligations. Two businesses that work together, such as a manufacturer and a parts supplier, may have contracts in place defining when payments should be made, what deliveries are necessary and other steps that need to be taken by each party.
Often, in order for legal action to be taken, the contract breach needs to be significant enough that it qualifies as a material breach. This means that it is a major deviation from the contractual agreement that was already put in place.
For example, if the manufacturer orders parts and materials that are never delivered at all, even though payment was made, it is clearly a material breach. If the delivery is late, things get a bit more complicated. A missed deadline can sometimes trigger legal action if the other party suffered harm, but it may not always be significant enough for a material breach.
Damage must have occurred
One key component is whether a company suffered damages that can be quantified financially.
For instance, say that the manufacturer needed the parts for production on a Monday, so they ordered them to be delivered on a Wednesday, ensuring they would be on hand in time for use when the plant opened on Monday.
If the supplier missed the deadline by just a single day, delivering them on Thursday, there may not actually be any material harm. The terms were not perfectly met, but the parts and materials did arrive in time for production.
On the other hand, if they were two weeks late, this could have caused significant financial harm. Production was impossible, deliveries were missed, wages were paid to workers who had nothing to do, and much more.
Sorting out all of these details can grow complex, and it is important for those involved in commercial litigation to know what legal steps to take.
