A breach of contract occurs when one party to a valid contract has failed to fulfill their side of the agreement. The terms of a contract are what guides the parties in what they must do, as well as how they should do it, in order to maintain their promise. If one party does not do what the contract instructs that they do, the non-breaching party can take legal action and file a lawsuit against them in court.
Breaches can be either partial or complete. Additionally, a court will consider whether the breach was substantial or minor. This helps the court to determine what type of damages the breaching party should pay.
There are three main ways in which a party can be held liable for breach of contract:
- Anticipatory Breach: Commonly referred to as anticipatory repudiation, this type of breach occurs when the breaching party informs the non-breaching party that they will not be fulfilling the terms of their contract. Once the other party has been notified, they can pursue legal action for breach of contract;
- Minor Breach: A minor breach of contract occurs when one party fails to perform a small detail of the contract. Under such circumstances, the entire contract has not been violated, and as such it can still be substantially performed. This also occurs when there is a technical error with the contract, such as a wrong date, price, or typo within the terms of the contract; and/or
- Material or Fundamental Breach: The breach is so substantial that it essentially cancels the contract entirely, because it renders performance by either party impossible.
Some other ways in which a contract can be breached include:
- When the contract is fraudulent;
- If the contract was formed illegally or is unconscionable; and
- When there is a mistake of fact present in the contract terms.
What Are Unilateral Mistakes?
In a contract context, a unilateral mistake refers to instances in which only one party is mistaken regarding a:
- Quantity; or
- Other measurements in a contract. This can create legal conflicts, especially if the mistake causes one party to suffer losses in the contract arrangement.
An especially common type of unilateral mistake would be when one party is mistaken regarding the price of a product or service. This is especially common in cases in which there is a conversion of monetary rates involved, such as in international exchanges. It may be necessary to return to the original contract document, as well as other forms of evidence in order to determine what the parties intended regarding the mistaken term.
Some other examples of unilateral mistake examples include:
- Mistakes associated with the quantity of a product to be delivered, especially for large numerical values;
- Misunderstandings of certain trade terms and technical phrases;
- Mistakes involving words that have several meanings, pronunciations, or spellings, such as “four” vs. “for”; and
- Errors associated with the quality or description of a product
The most common legal remedies for a unilateral mistake include:
- Reformation, which involves changing the part of the contract where the mistake lies; or
- Rescission, which involves canceling the entire contract.
Reformation generally results when only one party knows of the mistake, while rescission occurs when the non-mistaken party actually knows about the other party’s mistake. As such, rescission may be required in order to prevent the non-mistaken party from taking advantage of the other party.
Are There Any Penalties For Breaching A Contract?
Remedies for breaching a contract in general include legal remedies, or equitable remedies. 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 make up for the damage that was done. This includes remedies such as specific performance, reformation, or rescission.
The difference between the remedies that are awarded will determine what the non-breaching party can expect to receive, and what the breaching party will be required to do. An example of this would be how when a person who is selling their house refuses to relinquish the keys and property to the buyer at their closing, the buyer may sue for specific performance. What this means is that the court can force the seller to give up their property to the buyer.
The type of legal remedy that is awarded will also determine how to calculate the amount of damages that the plaintiff should receive. An example of this would be if a buyer has already paid for certain items to be shipped to them, but the company who owns the products never sends the order and keeps the money. The buyer can then sue for breach of contract and collect compensatory damages from the seller, or they could seek restitution for the missing merchandise instead.
What Are Some Defenses To Breach Of Contract?
There are many defenses that may be used against a breach of contract claim. Some of the most common types of defenses against a breach of contract include:
- Fraud: Fraud occurs when one party intentionally misleads another party about the purpose or conditions of a contract, in order to persuade them to sign and fulfill it;
- Capacity: If the breaching party lacked the capacity or competency necessary to enter into a contract, such as being a minor or mentally incapable, this may be used as a defense;
- Illegal: If the contract itself is considered to be illegal, it would be considered a defense. An example of this would be how a contract to sell drugs or murder someone would be an illegal contract;
- Mutual Mistake: If both of the parties are mistaken about the purpose or terms of their agreement, this can serve as a defense to breach of contract;
- Duress: If the other party forced the breaching party to sign the contract against their will, this defense will invalidate the contract;
- Unclean Hands: Unclean hands, or the “dirty hands” doctrine, is generally raised in cases in which both parties have committed wrongdoing that resulted in a breach of contract. It is an equitable or affirmative defense that prevents the party who is bringing the lawsuit from collecting any damages, because both are at fault.
- Once the defendant uses this defense, the burden of proof will then shift to the plaintiff to prove that they have not in fact done anything wrong in order to breach the contract;
- Statute of Frauds: The Statute of Frauds is a law that applies to contracts, and states that specific contracts must be in writing in order for them to be valid and enforceable by a court; and/or
- Unconscionable Contract: An unconscionable contract is created in such a way that provides one party with many benefits, and the other party with almost no advantages. This frequently occurs in cases in which there is an individual or small business being taken advantage of by a larger corporation during contract negotiations.
- While this is not technically a type of defense, if the court finds that the contract is unconscionable, they will generally void the contract. Doing so will release the parties from any contract obligations, and no damages or remedies will be awarded.
Do I Need A Lawyer For Help With Unilateral Mistakes?
Contract legal disputes, such as those involving a unilateral mistake, generally require the help of a qualified contracts lawyer. You should consult with a contract lawyer in your area, as they can help you understand your legal rights and options. Additionally, an attorney will also be able to represent you in court, as needed, should legal action become necessary.