Contractual liability: when are you liable as an entrepreneur?

Contractual liability arises when a party fails to fulfill or incorrectly fulfills the agreements from a contract. In legal terms, this is called breach of contract. For entrepreneurs, this is one of the most common forms of liability.

When is there a breach of contract?

A breach of contract can occur when:

• ✓ a service is not delivered, delivered late, or delivered incompletely
• ✓ a product does not meet the agreed specifications
• ✓ agreed deadlines are not met
• ✓ agreements are executed differently than agreed

Not every shortcoming directly leads to liability. In many cases, the other party must first put you in default and give you a reasonable period to still fulfill correctly.

The role of general terms and conditions

General terms and conditions play a crucial role in contractual liability. They can, for example:

• ✓ limit liability to a maximum amount
• ✓ exclude indirect damage or consequential damage
• ✓ link to short complaint and expiry periods

However, the condition is that these general terms and conditions are legally correctly drafted and have been validly declared applicable.

Common mistakes by entrepreneurs

In practice, we regularly see the following pitfalls:

• ✓ unclear or contradictory contract provisions
• ✓ outdated or copied general terms and conditions
• ✓ oral commitments that have not been recorded in writing

Practical example

A marketing agency promises to deliver an online campaign within four weeks. Due to internal problems, the campaign is only launched after eight weeks. The client claims to have lost revenue and holds the agency liable for the damage.