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What is a Breach of Contract? | LegalMatch Law Library

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What is a Breach of Contract?

A contract is a written or spoken promise, or series of promises, between two parties. Each party to a contract promises to perform a certain duty or pay a certain amount. The agreement is meant to be legally enforceable, so that each party will have legal recourse if the agreement isn’t kept.

A breach of contract occurs when the agreement is not kept, because one party to the contract does not fulfill their obligation according to its terms.

A breach can occur if a party fails to perform within the time frame specified in the contract, does not perform in accordance with the terms of the agreement, or fails to perform whatsoever.

If one party fails to perform while the other party fulfills her duties under the contract, the performing party is entitled to legal remedies for breach of contract.

What are the Different Types of Breaches?

The following are different types of contract breaches:

  • Minor Breach: a minor breach occurs when one party “substantially performs,” or meets the essential obligations of the contract, but does not meet a condition that is minor and does not affect the contract terms. This is also known as a partial breach.
  • Material Breach: A material breach is a substantial breach in contract terms usually excusing the non-breaching party from performing and giving her the right to sue for damages. 
    • For example, in a home purchase contract, a seller refusing to give the buyer the keys to the home after the buyer has completed all contract terms is a material breach.
  • Fundamental Breach: This occurs when one party violates the contract terms so egregiously that the other party may terminate the contract (as well as seek damages).
  • Anticipatory Breach: Contracts generally have set dates on which “performance,” or fulfillment of the contract’s obligations, are required. 
    • If one of the parties commits a breach prior to that time, then they have committed an anticipatory repudiation, or anticipatory breach. If this occurs, the non-breaching party may immediately consider the contract breached, and take legal action.

What is the Difference Between Oral v. Written Contract?

Contracts made only by spoken agreement may be legally enforceable. However, it is best to memorialize them in writing, especially if a legal remedy becomes necessary, so that there will be proof in court. Also, there are certain types of contracts that must be in writing in order to be enforceable:

  • Contracts involving the sale or transfer of land;
  • Promises to pay someone’s debt obligations;
  • Contracts that cannot be completed within one year of its making;
  • Contracts involving the sale of goods for more than $500; and,
  • Contracts that will go beyond the lifetime of the one performing the contract.

What Remedies are Available for a Breached Contract?

There are several remedies for breach of contract:

  • Compensatory Damages: The most common legal remedy, compensatory damages are a monetary award to compensate the aggrieved party. A court can order the person who breached the contract to pay the aggrieved party enough money to get what they were promised by the terms of the contract.
  • Restitution: A court orders restitution if they order the breaching party to pay back the other person the amount the aggrieved party paid initially to make the aggrieved party “whole” again.
  • Punitive Damages: If the breach of contract is especially heinous, a court may order punitive damages, meant to punish the breaching party for breaking the terms of the contract.
  • Specific Performance: A court can force the breaching party to perform the service or deliver the goods that were promised in a contract.

What Should You Do in the Event of a Breach?

If there has been a breach of contract, your first step is to look at the contract to see if there is instructions as to what you should do in the event of a breach.

Many contracts will talk about mandatory arbitration or about a liquidated damages clause that goes into effect. It’s important to thoroughly read the contract before you make any quick decisions.

Your second step should be to let the other party know that a breach has occurred. If you committed the breach but do not want to tell them, then you can face more serious consequences if you attempt to hide the breach.

If the other party breached, then it’s important to tell them that you are aware of a breach and ask them if they can verify it. While a breach of contract can be stressful, giving the other party an opportunity to remedy the breach can strengthen your case if you go to court.

The third step is to discuss the situation either with the other party or a lawyer. If you feel that the breach will require you to go to court, then contact your lawyer right away and let them know of the situation.

Be sure to hold onto any documents related to the contract and keep careful record of every incident that occurred from the contract. This will make it easier for you to argue the merits of your argument and be compensated for the breach.

Do I Need to Consult an Attorney?

Contract law can be complicated, and every state has different lawsuit filing procedures and deadlines for breach of contract claims.

Speaking with a knowledgeable business attorney can help determine what remedies are available to you. The above remedies can be attained by working with a knowledgeable contract lawyer.

Photo of page author Katie Hamblen

, LegalMatch Legal Writer

Last Modified: 06-22-2018 03:24 PM PDT

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