A breach of contract is what occurs when a party to a valid contract fails to fulfill their side of the agreement. The terms of a contract guide the parties in what they must do, and how they must do it, in order to maintain their promise. If a party to the contract does not adhere to the terms of the contract, the non-breaching party will be allowed to take legal action and can file a lawsuit against the breaching party.
Contract breaches can occur either partially, or completely. A court will also assess whether the breach was substantial or minor. This helps the court determine what type of damages the breaching party should pay to the non-breaching party.
There are three main ways in which a party may be held liable for a breach of contract:
- Anticipatory Breach: This is often referred to as anticipatory repudiation, and occurs when the breaching party tells the non-breaching party that they will not be fulfilling the terms of their contract. Once the other party has been notified, they may sue for breach of contract;
- Minor Breach: A minor breach of contract happens when a party fails to perform a small detail of the contract. Because the breach is so small, the entire contract has not been violated and can still be substantially performed. This may also occur when there is a technical error with the contract, such as a wrong date, price, or typo within the terms of the contract; and
- Material or Fundamental Breach: Material or fundamental breaches are most commonly cited as the basis of a breach of contract legal action. The breach is so substantial that it essentially cancels the contract, due to the fact that it renders performance by either party entirely impossible.
Some other ways that a contract can be breached include:
- When the contract is fraudulent;
- If the contract was formed illegally;
- The contract is unconscionable; and
- When there is a mistake of fact present in the contract terms.
The parties involved in the contract may also include conditions unique to their particular contract, which are intended to specify when a party’s actions could be considered a breach. Additionally, state laws and the type of contract may determine other ways in which a contract can be breached.
Generally speaking, there are two types of remedies that a party may receive for breach of contract. Legal remedies refer to monetary award damages, such as compensatory, nominal, and liquidated damages. Equitable remedies are issued by a court when a legal remedy will not sufficiently compensate for the damage done. This includes remedies such as specific performance, reformation, or rescission. The difference between the remedies awarded will determine what the non-breaching party could receive, and what the breaching party will be required to do.
What Are Statutory Damages? How Do Statutory Damages Differ From Actual Damages?
Statutory damages refer to a very specific type of damages that are issued in some breach of contract lawsuits. These damages are based on the requirements and guidelines that are listed in state statutes, which vary by state. They can sometimes vary by local jurisdiction as well; as such, the amount recovered is determined by the statute, rather than by any calculations made in court.
Actual, or compensatory, damages are intended to restore the injured party to their original financial condition. In a legal action for breach of contract, compensatory damages generally include any calculable expenses incurred by the non-breaching party as a result of the breach. Statutory damages, however, are required by and contained in a state’s statutory law. As such, they do not have to be calculated precisely and proven to the court.
Unlike actual damages, the person alleging an injury does not need to prove that they are entitled to a certain amount of damages. They need only to prove that the other party has violated the law.
When Are Statutory Damages Issued? Why Are Statutory Damages Important?
To reiterate, statutory damages are generally issued as required by the law. Because of this, the only required proof is that the defendant violated the law in question. Statutory damages are often issued in cases involving:
- Breaches of copyright law;
- Breaches of intellectual property statutes;
- Violations involving public policy; and
- Specific landlord and tenant lawsuits, such as those involving statutory requirements for deposits.
Statutory damages can be especially important in lawsuits involving breach of contract disputes. This is because the judge will generally only award the plaintiff with those damages that were contemplated by the parties at the time the agreement was made.
Statutory damages allow the plaintiff to recover a substantial amount of damages, even in cases in which the actual monetary loss is quite small. Another example would be cases where it is considerably difficult to prove exactly how much money they are entitled to, or which damages were foreseeable by the contracted parties.
Judges may also decide to award statutory damages when they believe that the defendant’s actions warrant a greater punishment than what they would receive if they only had to pay actual damages.
How Do I Sue for a Breach of Contract?
Before filing a breach of contract claim, it is important that you review the contract for any clauses which clarify whether a lawsuit may be brought. The contract terms may only allow the parties to enter into mediation or arbitration in order to resolve an issue. What this means is that the terms may not allow for a lawsuit in court, only alternative dispute resolution. Additionally, there may be a time limit or procedure that the parties must follow before they can legally file a lawsuit.
Another point to clarify would be if there are certain elements present for the case. The majority of breach of contract claims involve having to prove the following four factors:
- That the parties have entered into an actual contract, and that the contract is considered to be valid according to state and federal contract laws;
- The non-breaching party must be able to provide evidence that they upheld their end of the deal, despite the other party not doing the same;
- The non-breaching party also must prove that the breach amounted to a material breach, or substantial violation of the terms of the contract, as minor or technical errors in a contract will not usually qualify for breach of contract claims; and
- The non-breaching party must demonstrate that the losses they suffered were, in fact, caused by the breach and can be calculated with a reasonable degree of certainty.
Once both of these initial steps have been completed, the non-breaching party should then file a breach of contract claim with the proper court. This is a generalization of the process to sue for a breach of contract; the exact process, as well as what remedies may be applied, will of course vary by state and case.
Do I Need an Attorney for Breach of Contract Cases?
If you are involved in a contract that has been breached, you should consult with a local contract attorney. An experienced local contract attorney would be best suited to understanding your state’s specific laws regarding contracts, as well as how those laws and statutes may affect the outcome of your case.
An attorney will be able to review the contract in question and determine the best legal course of action moving forward. An attorney will also be able to represent you in court and work towards an appropriate damages award, such as statutory damages.