For owners of small businesses, contracts provide the assurance needed to run operations and serve the clients’ needs. When a partner, supplier or other stakeholder breaks a contract, the impact can damage a company’s reputation and the bottom line.

In this situation, explore the laws and potential legal remedies governing breach of contract in Tennessee.

Defining breach of contract

Both written and oral contracts are legally binding under state law. When two or more individuals create this type of agreement but one does not live up to the terms and conditions, the other party or parties can file a lawsuit. Recognized types of breach of contract in Tennessee include:

  • Anticipatory breach, in which one party believes the other party will not fulfill the terms of the contract. For example, the plaintiff may claim that too much time has passed for the defendant to meet the established deadline.
  • Fundamental breach, in which the conduct of a party goes against the basic tenets of the agreement. For example, the defendant may have failed to deliver supplies as agreed.
  • Material breach, which occurs when the defendant does not correctly fulfill the contract. For example, the defendant may have produced goods of inferior quality.
  • Technical breach, which constitutes a minor deviation from contract terms. For example, the plaintiff may have received inventory items in a single color instead of the requested assortment of colors.

Pursuing breach of contract remedies

Businesses can file a civil suit for breach of contract if they can prove a contract existed, a breach occurred at the fault of the defendant and the breach caused the plaintiff financial damages.

Tennessee offers six general types of legal remedies for breach of contract:

  • Compensation: Damages for losses suffered by the breach
  • Contract per se remedy: Damages or other remedy as indicated by the original contract
  • Restitution: Reinstatement of the contract by legal order
  • Reformation: Changing the contract with updated terms that meet the needs of all parties
  • Rescission: Contract cancellation with payment recovery
  • Specific performance: Legal order enforcing the contract terms

Businesses in Tennessee can file a breach of contract lawsuit as long as the breach occurred less than six years ago.