Who Can Sue for Breach of Contract?
Contracts make business happen. These extremely useful tools set the relationship between two parties in stone by dictating how their relationship will take place. However, when one party breaches a contract, those who are involved could be hurt, including sustaining possible damages. Fortunately, parties who breach contracts can be held accountable through a breach of contract lawsuit. However, you must be one of the parties who the law says is eligible to file. Let’s take a closer look at who that is.
The laws are designed so that only those who have been impacted by the breach of contract can file a lawsuit for it. This means there are two types of party: primary first parties, and third parties. First-parties are those who are directly involved in the contract itself. For example, if the contract is between two or more businesses to create a mutually-beneficial deal, any of the businesses named in the contract could potentially sue for the breach.
Third parties are those who are not directly involved in the contract itself, but have a stake in its execution. These are less common, but can still be seen quite often in disputes between two businesses. For example, let’s say Company A produces a raw material they then sell to Company B and Company B turns those materials into parts that they sell to Company C. If Company A breaches the terms of their contract with Company B, causing Company B’s business to slow down or be impacted, Company C could potentially sue Company A for the damages they sustain as a result of their breach. In this situation, Company C is known as a “third party beneficiary.”
Did a Breach Occur?
The next question you need to answer is whether or not a breach of contract actually occurred. After all, if no breach actually happened, then you don’t have the right to sue the party you suspect breached the terms. Here are some questions to ask to determine if you’re eligible to sue:
- Was there a contract in the first place? Contracts don’t have to be written to be official, but they do have to exist to be enforceable.
- Are you within your legal limits? You only have a limited amount of time to file a lawsuit for the breach of contract. If you’re beyond this limit, your case will probably be tossed out.
- Did you suffer damages? You must have suffered some sort of damages directly as a result of the breach itself. If you suffered damages unrelated to the contract, you can’t sue for a breach.
- Did you perform your end of the bargain? If you failed to adhere to your responsibilities as a part of the contract, and this caused the other party to not be able to uphold their end, then you can’t sue them for breaching their end of the deal.