What are the financial implications of breaking a contract?
Question:
Answer:
Depends on the contract, the law governing the contract (eg country/state), what it contains, who does the breaking, and whether it was "for cause". ie whether there was a good (legal) reason to break the contract.
Implications can include : Project delays, risk of being sued, having to replace vendor, loss of revenue, loss of reputation, dropped from preferred vendor lists.
Also may be positive implications if things are not going well though. eg. cancelling a contract that's not going well before it gets completely out of hand.
Good contracts usually have clauses that specify the penalties for breaking them.
Some contracts have default penalties written into the state laws.
Precedent of previous judgements also come into play.
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