A Business-Minded Approach To Employment Law

Understanding a breach of covenant and how to resolve it

On Behalf of | May 21, 2023 | Employment Contracts |

Florida is a state full of hard-working business professionals. Understandably, many of these individuals work for companies that utilize contracts to conduct business. In a perfect world, each party would honor their commitments or contract covenants. Unfortunately, that doesn’t always happen.

What does a breach of covenant mean?

A covenant is any condition or promise contained in a written contract. Covenants can involve tangible things like properties or vehicles. A covenant can also detail partnership and business-related stipulations. When a breach of covenant happens, a party involved in a contract didn’t meet one or all of its conditions.

Remedying a contract breach

When a breach of contract happens, the party who committed this breach of covenant faces the consequences. A well-written contract should detail the exact implications of covenant breaches. Sometimes, a breach of covenant can lead to the guilty party paying damages to the other party involved in a breached contract.

A court typically considers expectation and consequential damages when calculating losses relating to a broken covenant. Expectation or general damages cover the difference between what the breaching party promised versus what they delivered. Consequential damages involve costs a non-breaching party incurred due to a breached contract.

If both parties want to maintain a positive relationship with the other, the non-breaching party might choose to do nothing about a breach of covenant. However, this outcome depends on the non-breaching party. Many cases also involve positive relationships between companies until one major breach sours this relationship.

All parties involved in a contract must understand what they’re committing to before signing this document. Revising a contract before it’s signed is often easier than dealing with a breach of contract.