LEGAL DICTIONARY

Breach of Contract

A breach of contract occurs when the agreed terms of a legal contract are broken by any of the parties. This can lead to serious consequences for the transgressor depending on how serious the breach is.

Understanding the types of breaches that can occur in legal agreements and what to do when this happens can be crucial to avoid the worst outcomes such as lawsuits and litigation. This article looks over these essential considerations and explains what you must know when handling contractual violations.

Types of Contract Breaches

There are many potential ways that you can break the terms of a written agreement. This first means understanding what makes a contract legal.

Once the agreement document has been signed it becomes legally binding and any of the conditions within it can be enforced by a judge or arbitrator. If you break these terms you could be judged to have breached the contract.

However, the extent of the breach and the way that the terms have been broken will often determine how serious the measures are. This will ultimately decide whether the contract can be salvaged or if more serious action is needed.

Anticipatory contract breaches

Parties can take action even before a contract breach has actually occurred. This can happen if another contracted party specifies that they cannot or will not complete their obligations as agreed.

Minor contract breaches

A minor breach of contract can be pursued if a party has fulfilled the majority of its obligations but has failed to comply with all the terms that were agreed. This might happen for example if products aren’t delivering on time or at the agreed price.

If the injured party can demonstrate financial losses have occurred thanks to this violation of the terms, they will be able to pursue the issue through courts or arbitration.

Be aware minor contract breaches are also known by a few other names, such as:

  • Immaterial breaches of contract
  • Partial breaches of contract

Material breaches of contract

A material breach of contract occurs when the contract is completed but doesn’t yield the promised results. This might happen if the product or service provided doesn’t follow some of the terms of the agreement. For example, if dairy products are delivered when non-dairy were requested in the document.

Actual contract breaches

Actual contract breaches are perhaps the most serious cases of all. These happen when one or more of the parties simply refuses or fails to provide what has been agreed.

Unlike an anticipatory breach, actual contract breaches occur when there is hard evidence to show the non-compliance of the parties involved. As a result, these issues might make it all the way to court if a solution cannot be found.

What Action Can Be Taken for a Breach of Contract

There are several options open to parties who have suffered from another party breaching their agreement. Depending on how significant the damage is, you would normally pursue the following courses of action:

Review the contract’s instructions for any breaches

Almost all contracts will outline steps that can be taken if any party breaches its terms. This can allow all the signatories to negotiate an outcome that resolves any issues that arise or that indicate compensatory measures.

This might include fines or holding the violating party to the contract as stated, or another suitable result. In any case, once a resolution has been agreed upon the contract could even continue in operation if it has time left to run.

Terminate the contract

If the breach is seen as significant enough, it could allow the injured party to end the contract there and then. This is sometimes the least costly approach if the agreement fails for any reason.

Seek arbitration or a court judgment

In cases where all discussions have irrevocably broken down or fraud has taken place, a court case might be the only solution. Some contracts will specify that alternative dispute resolution (ADR) must take place whilst others use language that allows a state court to take the case.

Usually, a court or arbitrator will need to see evidence of the following for any legal complaints to be upheld:

  • A valid written contract signed by the parties involved
  • Clear proof of a breach
  • Damages that have been incurred as a result of the breach