You create a contract for a reason: You want to bind other parties to an agreement, so they don’t back out or cost you money or time. When someone violates a contract with you, it’s well within your rights to take legal action to obtain compensation or to have them otherwise repay you for your losses.

A breach of contract is a serious civil claim that can mean heavy losses for one or both parties. For example, if an employee leaves a company and gives a new company information about the other’s processes, it could make the competitor stronger and cost the original company significant revenue. This is, in the majority of cases, a breach of contract.

What happens when someone breaches a contract?

Depending on how serious the violation is, the repercussions could vary from getting fired from a job to being sued for millions. One or both parties may dispute that the contract was violated or attempt to seek reparations for financial losses.

In most cases, breaches of contract begin with arbitration or mediation to work through the issue and resolve it. It’s not always the case that a breach of contract goes to court or trial. Formal lawsuits aren’t the only option when a business, employees or others are engaged in a dispute over a contract.

What can you receive in compensation after a breach of contract?

It’s possible to receive damages, to require a performance of a certain type or to cancel the contract and receive restitution. In the majority of cases, it’s the payment of damages that resolves the dispute. One party pays the other, in one way or another, for the losses it caused. For example, if you think about the employee above, he or she may be held to the contract and forced to pay the company its losses. Alternative, the company could require the competitor to disclose where it got the information or to fire the employee as a kind of compensation.

No two breach-of-contract lawsuits or situations are the same, so companies often work with attorneys when they want to sort out a problem. Most situations end before heading to court, but some organizations take their disputes through the court process to make sure it’s publicly known that an individual or a business violated a contract with them.