What Happens if Both Parties Breach a Contract in Maryland?

A breach of contract occurs when either party fails to follow through with the terms of their agreement or violates any part of the agreement.  When a breach of contract occurs, the parties who were harmed in the breach may be entitled to sue the breaching parties for damages.  What happens if both parties breach the contract and cause damages for the other party?  Does the contract simply end?  Baltimore breach of contract attorney William S. Heyman of the Heyman Law Firm explains how these cases and the damages involved can become complicated.

Does a Contract End if Both Parties Breach It?

When one party breaches a contract, it doesn’t immediately end the contract.  Typically, the contract still stands, and both parties are still held to the terms of the contract.  This is what allows a court to continue to hold parties accountable and order them to pay damages according to the contract’s terms.  Since one person’s breach doesn’t end the contract, that means that the other party is still bound by the contract.

Since the contract is still active after the first breach, the second party still needs to follow its terms.  This means that the other party isn’t able to walk away from the deal or simply get away with ignoring the contract.  Anything that they do to violate the agreement will still be considered a breach as well.

Just like the first breach, a second breach does not destroy the contract either.  Instead, both parties are considered in breach and both parties may be able to pursue claims against each other for breach of contract.

Can Both Sides Sue for Breach of Contract?

Since breaching a contract doesn’t destroy the contract, both sides are still able to file a lawsuit for breach of contract and seek damages.  Although both sides might have dirt on their hands, it doesn’t excuse the other party’s violations, and each party might be entitled to compensation.

Typically, a victim of a breach of contract is entitled to whatever damages are appropriate in their case.  This may include damages that were set in advance under the terms of the contract, such predetermined, “liquidated damages.”  It may also include any damages that arise as a consequence of the breach, such as the cost of replacement goods or services or measurable damage to your business brought on by the breach.

In cases where both sides breach the contract, both sides are entitled to claim these damages.  When each side is required to pay the other, these damages might cancel out in part.  In many cases, this might mean that only the side with the highest damages ends up collecting.

When determining damages and deciding which side will recover compensation from the case, it is important to look at the specific accusations of breach.  Not every breach is equal, and some breaches cause far more damages than others.  These cases are often litigated in court with the help of commercial litigation attorneys advocating for each side to maximize or minimize damages.

The severity of a breach will often hinge on how closely it affects the core parts of the agreement.  A breach is said to be “material” if it violates the main purposes of the contract, such as the amounts to be paid, the services to be rendered, the property to be handed over, or other items at issue.  Damages for these kinds of breaches can be substantial.  If a breach is not material, it may involve partial performance, missed deadlines, improper communication, or other issues that only violate technical terms and not the core issues of the contract.  These breaches may not entitle someone to damages at all or may result in low damages.

Because of this, typically only major, material breaches lead to damages when both parties breach the contract.

Other Breach of Contract Remedies

Damages are not the only remedy for breach of contract.  Especially when both parties breach, monetary damages might not be the reason for suing.  Instead of damages, some contract may justify “specific performance” as a remedy.  This means that the court will order the breaching party to turn over the specific piece of property or to perform the service as required in the contract.  This is common in real estate disputes and other contract cases dealing with non-fungible commodities.

Other remedies may include modifying the agreement or ending it.  Although a breach of contract is not an excuse for the other side to breach and breaching a contract does not usually end the agreement, sometimes throwing out the whole agreement is the best way to do justice.  Alternatively, the court may find that the best outcome is to modify the contract.  This could help the parties move past the breach and continue to use and enforce the contract if it is important to salvage the agreement.

Typically, after awarding damages for a breach, the court will allow the parties to move along and will stop enforcing the agreement.  Only after the case has been settled or decided by a court are further breaches not considered.  Until then, it is often important to avoid breaching a contract, even after the other party has already breached.  Talk to our Baltimore business advisory lawyers about how to protect yourself in a breach of contract case and avoid your own breach and damages.

Call Our Breach of Contract Lawyer

If you or your business is involved in a contract that both parties have breached, you should contact a Columbia breach of contract attorney for help protecting your rights and your business.  At the Heyman Law Firm, our Baltimore business litigation attorneys may be able to advise your business and negotiate contract settlements as well as litigate your breach of contract case in court.  Call our law offices today to set up a legal consultation.  Our number is (410) 305-9287.