Breaching vs. Non-Breaching Parties in a Contract

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 What is a Breach of Contract?

When two or more parties enter into a contract agreement, there are certain obligations that each of the parties will need to perform. The contract is not considered to be complete until all parties have fulfilled their contractual obligations to one another. If one or more of the parties fail to carry out their legal duties, then their actions may constitute and give rise to a breach of contract claim. 

For instance, if a purchaser was supposed to pay a seller for the goods they provided and the purchaser either fails to pay them or fails to pay them by a certain time, then this may qualify as an example of a breach of contract.

In general, a claim for breach of contract can involve a partial or total breach. A civil court will also need to assess whether a breach is considered to be substantial or only a minor breach of the contract.

The court will do this by evaluating the effects that the breach had on the outcome of the contract. This portion of a case is very important since it can help determine the amount of damages that the non-breaching party can recover for any losses they suffered as a result of a breach.

Some other examples of conduct that may lead to a breach of contract dispute include:

  • If a party fails to perform some or all of their duties under the contract by the agreed upon time;
  • If a party completes performance of their duties, but does it in a manner that does not conform to the terms of the contract; and/or
  • If a party indicates that they have no intention of performing their duties long before the contract is even due. 

What are the Remedies for Breach of Contract?

As soon as a breach of contract has occurred, the first step that a party should take is to review their contract for any information regarding what to do in the event of a breach. The majority of contracts will take this into consideration and will include it as part of the terms while the contract is being formed. Some contracts may even contain special procedures or clauses in anticipation of a breach. 

In instances where no formal guidance has been provided and any attempts to resolve a contract dispute amongst the parties has failed, then the parties will need to resort to filing the matter in court in order to settle the issue. Additionally, the parties also have the option of selecting a different method of dispute resolution, such as arbitration or mediation, as opposed to a court.

Regardless of which method the parties decide to use, the most common remedies for a breach of contract include:

  • Monetary damages;
  • Rescission;
  • Specific performance;
  • Injunctions;
  • Restitution; and/or
  • Liquidated damages.

Can a Breaching Party Recover Damages in a Contract Dispute?

In most breach of contract lawsuits, it is usually the non-breaching party who recovers damages and/or other legal remedies. However, there are some situations wherein a breaching party may be able to recover damages in a contract dispute as well. The following is a list of some common scenarios in which a breaching party may potentially be able to recover damages in a contract dispute:

  • When both parties are in breach of the contract: If both parties are responsible for breaching the contract, then the breaching party may be able to recover some percentage of damages from the non-breaching party. Depending on the circumstances, the breaching party also may be able to reduce the amount of damages they have to pay to the non-breaching party when both parties have breached a contract. 
  • When a valid legal defense exists: In some cases, the breaching party may not have wanted to intentionally breach the contract, but was forced to due to circumstances that were beyond their control and interfered with their ability to perform the contractual obligations. In such instances, there are a number of legal defenses that the breaching party might be able to raise against a breach of contract claim. 
    • For instance, if the non-breaching party stopped the breaching party from fulfilling their duties under the contract after the circumstances changed, then the breaching party may be able to recover damages in the event of a contract dispute.
  • When a breaching party performs a substantial portion of the contract: If the breaching party has already performed a significant portion of their legal duties, then they may still be able to recover damages if the breach only had a minimal impact on the outcome of the contract. A breaching party can also recover damages for a breach that occurred after they have already performed a substantial part of the contract if the non-breaching party materially benefits from their actions. 
    • In such cases, the breaching party may be granted restitution. Restitution is a type of a legal remedy used in contract law that essentially places the parties in the same economic position they would be in had they never signed the contract.
  • When a non-breaching party does not give the breaching party a chance to fix the breach: Generally speaking, when a contract breach is considered to be minor, the non-breaching party will be required to give the breaching party an opportunity to cure the issue if the breaching party has asked them for more time. 
    • If the non-breaching party refuses the request for additional time and does not allow the breaching party to fix it, then the non-breaching party can be held liable for any losses that the breaching party suffered as a result of terminating the contract. 

Does It Matter Which Party Breached the Contract First?

According to a concept in contract law that is known as the “first breach doctrine”, the first party to breach the contract will lose the right to bring a lawsuit to have the contract enforced against the other party. This is true even in cases where the other party commits a subsequent breach. However, the first breach doctrine will only apply if the initial breach was material and would alter the outcome of the contract.

For example, if a party fails to pay the other party the amount of money that was specified in their contract, then this action would constitute a material breach.

In other words, the breaching party did not pay for the goods or services rendered and thus caused the non-breaching party to suffer financial loss, as opposed to the profit they were supposed to make from entering into the contract. Accordingly, the resulting circumstances have significantly changed due to the breach.

Another important concept that comes up when discussing which party breached the contract first is the doctrine of “anticipatory repudiation”. Anticipatory repudiation may occur when a contracting party expresses verbally or implies through their conduct that they have no intention of fulfilling their portion of the contract. 

The breaching party must provide some indication that shows they will not perform their contractual obligations long before performance is ever due. When such a situation arises, the non-breaching party may declare anticipatory repudiation, which will allow them to suspend performance on the contract and file a lawsuit against the other party for breach of contract. Therefore, in many cases it does matter which party breached the contract first.

Should I Contact a Business Lawyer?

Whether you are being sued for breaching the terms of a contract or are the one who wants to file a lawsuit against another party for breach of contract, it is always best to consult with a lawyer first before taking any legal action involving breach of contract claims. Breach of contract issues can be complicated and may lead to large damages awards. Thus, you should hire a local contract attorney to review the facts of your case.

An experienced contract attorney will be able to inform you on whether there are any legal defenses you can raise or any remedies that you can recover, depending on your situation. Your attorney can also discuss your legal rights under the contract and can explain how the contract laws in your jurisdiction may affect the outcome of your case.

In addition, your attorney can assist you with filing a lawsuit and can provide representation in court. Alternatively, if you and the other party so choose, your attorney can also represent you at a settlement conference or during some other method of dispute resolution.  


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