How to Respond If Someone Breaches Your Business Contract

Protect Your Business with a Smart and Strategic Legal Response

Business contracts are the backbone of professional relationships — whether with vendors, clients, contractors, or partners. But what happens when one party doesn’t hold up their end of the bargain?

If you’re facing a contract breach, it’s important to act swiftly and strategically to protect your rights, recover damages, and maintain leverage. This article outlines the key steps Arizona business owners should take if someone breaches their contract.

What Is a Breach of Contract?

A breach of contract occurs when one party fails to perform a duty or promise that is legally binding.

There are three main types¹:

1. Material Breach – A major failure that defeats the purpose of the contract


2. Minor Breach – A partial failure that does not excuse the other party from performance


3. Anticipatory Breach – When one party makes it clear they won’t fulfill their obligation before the deadline

These categories stem from widely accepted common law principles, including the Restatement (Second) of Contracts and Arizona case law.

Step 1: Review the Contract Terms Carefully

Before taking action, review the written contract in detail. Look for:

• Specific obligations and timelines

• Breach or default clauses

• Notice requirements

• Dispute resolution procedures (e.g., mediation, arbitration, jurisdiction)

A well-drafted contract should outline what qualifies as a breach and what remedies are available.

Step 2: Document Everything

Keep a detailed record of:

• What was agreed upon

• Communications with the other party

• Missed deadlines or failed deliverables

• Any financial losses or operational disruptions

If the situation escalates, this documentation will be vital for settlement negotiations, mediation, or litigation.

Step 3: Notify the Other Party in Writing

Most contracts require some form of written notice of default. Even if yours doesn’t, it’s a best practice.

Include:

• A clear statement that a breach has occurred

• Reference to the specific provision of the contract

• What you expect the other party to do (e.g., cure the breach)

• A deadline to respond or take corrective action

Pro tip: Use professional language — not anger. You may end up in court, and your communications can be used as evidence.

Step 4: Consider Your Legal Remedies

Under Arizona law, the non-breaching party may be entitled to a variety of remedies, depending on the nature and severity of the breach. These remedies include:

• Compensatory damages - Recovery of actual losses incurred due to the breach²
• Consequential damages - Recovery for foreseeaable indirect losses³
• Specific performance - A court order requiring the breaching party to fulfill their contractual obligation⁴
• Contract cancellation and restitution - Returning the parties to their original position⁵
• Attorney's fees - If permitted by the contract, or by statute for contested contract actions⁶

Step 5: Consult a Business Attorney Before You Retaliate or Walk Away

It’s tempting to immediately cancel the contract or stop performing your own obligations, but doing so can expose your business to liability.

An Arizona business attorney can help you:

• Confirm whether a breach is material under Arizona law

• Ensure that you comply with any contractual notice provisions

• Draft a formal demand letter

• Advise whether to initiate mediation, arbitration, or litigation

Taking unilateral action could be considered a breach on your part if not handled correctly.

Step 6: Negotiate or Enforce — Based on Strategy, Not Emotion

Depending on the circumstances, a formal demand letter may bring the other party into compliance. If not, you may need to:

• Trigger the dispute resolution clause in the contract

• Seek mediation or arbitration

• File a breach of contract claim in Arizona Superior Court

A strategic approach—guided by your attorney—ensures your response is proportional, cost-effective, and legally sound.

Final Thoughts

Breaches happen. But a breach of contract doesn’t mean your business has to suffer. By following the right steps under Arizona law, you can hold the other party accountable while protecting your business interests.

If you believe your contract has been breached, Obsidian Ridge Law can help. We’ll review your agreement, assess your remedies under Arizona law, and help you take decisive action.

Schedule a consultation: https://www.obsidianridgelaw.com/contact

1. Restatement (Second) of Contracts §§ 241–250; Zancanaro v. Cross, 85 Ariz. 394, 339 P.2d 746 (1959); Contracts: Examples & Explanations, Blum, 8th ed.
2. A.R.S. § 12-341 – Action on Contract: https://www.azleg.gov/ars/12/00341.htm
3. A.R.S. § 47-2715 – Consequential Damages: https://www.azleg.gov/ars/47/02715.htm
4. A.R.S. § 12-1801 – Specific Performance: https://www.azleg.gov/ars/12/01801.htm
5. A.R.S. § 12-1831 et seq. – Declaratory Judgments Act: https://www.azleg.gov/arsDetail/?title=12
6. A.R.S. § 12-341.01 – Attorney’s Fees: https://www.azleg.gov/ars/12/00341-01.htm