Breach of Contract: Meaning in a Merchant Cash Advance
Breach of contract is failing to do what a contract requires, without a legal excuse. In a merchant cash advance, common breaches include diverting sales, closing the bank account, stacking without consent or giving false information.
What does breach of contract mean?
Your merchant agreement lists promises. Breaking one is a breach. Some breaches are minor, like sending statements late. Others go to the heart of the deal, like moving sales to an account the funder can't reach. The contract usually says which breaches count as events of default.
Why does breach of contract matter to your business?
Breach is the legal foundation for most funder lawsuits. It's also what can trigger the personal guarantee. Knowing that slower sales alone usually aren't a breach under a true MCA, while diverting sales usually is, helps you act the right way when business gets tough.
What if the funder breaches?
Funders can breach too, for example by debiting more than the contract allows or refusing a valid reconciliation request. Keep records if you believe that happened.
How do you respond to a breach claim?
Answer claims of breach in writing, with facts and documents.
What remedies follow a breach?
When a breach is proven, the harmed side is usually entitled to damages meant to put it where it would have been if the contract had been kept. In MCA disputes, that often means the unpaid purchased amount plus fees the contract allows. Contracts sometimes add remedies of their own, like acceleration.
Where will you see it?
In demand letters and lawsuits, and in the events of default section of your contract.
Is this legal advice?
This is general information, not legal advice.
Which terms are related to breach of contract?
The full list is in the glossary. Owners ask about this in What should I do if I get a demand letter from an MCA funder?.
A term on your offer you don't recognize?
Send us the line and we'll tell you what it means. Call 877-FUND-654 with any question. We call you back, usually the same business day, and we always talk with you before we shop your file.