In every contract, the parties’ rights and obligations are defined within the terms. These terms should include what is expected from each party and how each of the obligations can be fulfilled. However, sometimes despite the contract terms a party fails to uphold the contract — either on accident or on purpose — and a breach of contact occurs. When this happens it is likely that a contract dispute will ensue over the breach.
A New Jersey city, Seaside Heights, is in the middle of investigating whether a breach of contract took place between the city and a towing company. This investigation could lead to a contract dispute, litigation and contract termination if a breach occurred.
Since 2010, the towing company has been the only company allowed to tow vehicles from the city under the terms of a three year contract. However, that contract has been called into question after Hurricane Sandy. According to residents of the town, the towing company was charging extremely high amounts to tow cars following the storm. These allegations are being investigated by the Ocean County Prosecutor’s office and by the Division of Consumer Affairs. The company could face criminal charges.
Seaside Heights is also conducting an investigation into the claims to see if a breach of the contract occurred. If Seaside Heights concludes that price gouging occurred then the contract will be considered breached. The town could completely end its relationship with the towing company and terminate the contract.
The towing company claims this was all a misunderstanding. It claims that the employee responsible for making the billing errors was fired. However, while the investigation continues, Seaside Heights has signed a 30 day contract with another towing company.
This case shows the serious repercussions a breach of contract can have on the companies involved. Business contracts need to be taken serious or financial consequences can follow.
Source: Asbury Park Press, “Seaside Heights hires new towing firm amid probes,” Kristi Funderburk, Jan. 7, 2013