Answer: Most people who breach a contract do not go to jail, but it is possible.
In the article that follows, we’ll explain.
Can You Go To Jail For Breach of Contract? (Explained)
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Basics of an Contract
A contract is a civil agreement, setting for the understanding of both parties, and voluntarily entered into with value being exchanged to both sides.
Most contracts explain what would constitute a violation of the contract, and also what the expected penalties could be.
A contract is governed by civil law and case precedent, is not governed by the criminal statutes of the jurisdiction.
What Happens When Someone Breaks a Contract?
If one party to the contract violates one of the agreements set forth, the party has committed a ‘breach of contract.’
The aggrieved party may pursue the remedies set forth in the agreement.
The aggrieved party could also file suit against the bad actor for violating the agreement, to seek recovery of any damages that resulted from the breach.
In general, almost everything that happens as the result of a contract breach happens on the civil side of things.
Could Criminal Charges Result From Breaking a Contract?
But in general, the behavior involved would need to rise to something fairly significant.
For example, if a contract prohibited allowing support staff to review technical documents (and staff did anyway), but no damages resulted from the breach, criminal implications are extremely unlikely to result even if the breach was reported to them.
But if the contract prohibited the disclosure of technical trade secrets vital to the production of a valuable product, and the bad actor purposefully disclosed the technical trade secrets to a competitor for financial gain, criminal implications become more likely.
The company which suffered the loss could report the event to law enforcement, and let the prosecutor (federal or state) review the case for criminal prosecution.
If the case was compelling enough, and the facts supported a conviction for a crime, the prosecution could go forward.
What could make a case compelling?
If the case involved serious financial losses, well-known high flier individuals, name brand companies, vulnerable people, the prosecutor might be more motivated.
Without the ‘compelling’ element, the prosecution might simply recommend that the aggrieved party battle the case out in civil court.
But the key thing to note here is that the parties cannot agree in the original contract that criminal prosecution would result from a breach of the contract.
In the end, the decision to pursue a bad actor with criminal charges in a contract breach lies with the prosecutor alone, and the parties involved cannot ‘file charges’ against each other on the criminal side on their own.
Potential criminal charges include: theft, misrepresentation, fraud, wire fraud, theft of trade secrets, economic espionage, intellectual property theft, piracy, and more.
Jail is a listed potential punishment for conviction for any of these crimes, and any jail sentence is determined by many factors including the seriousness of the offense, the facts of the case, and the offender’s criminal history.
Will You Go To Jail For Breaching a Contract?
The facts of most contract breach scenarios do not rise to the level of seriousness that would result in a criminal prosecution.
Prosecutor offices across the country are under funded and over burdened.
Those involved in a contract breach have the option to pursue remedies on the civil side to try and balance the scales of justice.
Much of what crosses a prosecutor’s desk on the criminal side does not have a civil option, and the prosecution is the only ‘justice’ the community can expect to receive.
That being said, if an contract was breached with purposeful intent, and serious damage resulted, a prosecution is not outside the possibility.
If you or someone you know has been involved in a serious contract breach, consider conferring with an attorney.
Even if you don’t think you’ll need a lawyer or be able to afford a retained lawyer in your case, early consultation with an experienced criminal defense lawyer in your state could prevent you from making your case worse and give you guidance about what to do next.
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