What is a Breach of Contract?

Breach of contract is a legal course of action and a kind of civil wrong in which one or more parties to a contract fail to honor a contractual agreement or bargained-for exchange by failing to perform or interfering with the other party’s performance. A breach happens when a contracting party fails to fulfill its responsibilities as stipulated in the contract, whether partially or entirely, or signals a desire to fail the obligation or otherwise appears unable to meet its obligation under the contract. When a contract is broken, the party who broke the contract is responsible for paying the damages to the aggrieved party.

Parties are legally entitled to undo work if a contract is canceled unless doing so would directly charge the other party at the time. The contract can be written by either side as long as all terms are agreed upon. Whether or not they wrote the contract, the party who committed to the original transaction has ten days to back out.

What constitutes a breach of contract?

A judge must study the contract to determine if it has been breached. To do so, they must look into the existence of a contract, the contract’s criteria, and whether any changes have been made to the contract. Only then can the judge decide whether or not a breach exists and how it should be classified.

Furthermore, for the contract to be breached and the judge to find it worthy of a breach, the plaintiff must show that there was a breach in the first place and that the plaintiff upheld its end of the bargain by fulfilling all obligations. Before initiating the action, the plaintiff must also notify the defendant of the breach.

Types of Breach

Material Breach

It is a failure to perform one’s contractual obligations—is one of the most serious, allowing the harmed business or individual to sue for damages in court.[I] Because his client failed to fulfill his half of the bargain, the broke contractor indicated above may be able to recover in court. When the contractor finished the task, he was supposed to get paid.

Anticipatory Breach

A breach planned ahead of time this sort of breach, also known as anticipatory repudiation, happens when the breaching party informs the non-breaching party that they will not be honoring their contract’s requirements. The other party can sue for breach of the contract once they’ve been notified. When it becomes clear that the other party will not fulfill his or her share of the contract within the allowed period, an anticipatory breach allows one party to claim the contract has been breached.

Minor Breach

When a party fails to perform a minor aspect of the contract, it is considered a minor breach of contract. The entire contract has not been breached in this situation, and it can still be substantially completed[II]. This can also happen if the contract contains a technological flaw (e.g., a wrong date, price, or typo within the terms of the contract).

Remedies

When a person or a company breaks a contract, the other party to the agreement is entitled to legal relief (or “remedy”).[III] The following are the most common remedies for a contract breach.

Damages

Specific Performance

Restitution, Reformation, and Rescission

Injunction

Compensatory damages

Damages intended to compensate the non-breaching party for the breach are known as compensatory damages[IV]. Expected and consequential damages are examples of this. The most typical legal remedy for violation of contract is an award of compensatory damages. Compensatory damages are calculated based on the real losses you have incurred as a result of the breach of contract.

Punitive damages

Punitive damages are intended to punish a wrongdoer to deter others from engaging in similar behavior in the future. Punitive damages, on the other hand, usually necessitate a stronger purpose than is required in regular breach of contract cases. On breach of contract lawsuits, several states expressly restrict plaintiffs from recovering punitive damages.

Liquidated damages

If the contract is breached, liquidated damages are specified damages that were previously identified by the parties in the contract itself. Liquidated damages should be a fair approximation of the actual damages that could be incurred as a result of a violation. There are generally parts of contracts where determining the exact amount of damage a party suffered as a result of a breach, such as a breach of a commitment not to compete, is difficult.

Specific Performance

Specific performance is a contract breach remedy in which the court orders the breaching party to provide the services or deliver the promised goods by the terms of the contract.[v] Only when monetary damages are insufficient to compensate the plaintiff for a violation is Specific Performance available. When the goods or services are so distinctive that no other cure will suffice, this remedy is utilized.

Restitution

Restitution is a legal remedy that aims to return the injured party to their pre-contract state or position. Parties seeking restitution, unlike those seeking damages, may not seek reimbursement for lost earnings or other financial losses caused by a violation. Restitution, on the other hand, is intended to return to the plaintiff any money or property supplied to the defendant under the contract. Restitution is usually utilized when a court declares a contract void because the defendant lacked the essential competence or capacity to enter into it.

Rescission

When parties engage in a contract through fraud, undue influence, coercion, or mistake, rescission is a remedy used to terminate the contract. In the event of rescission, both parties’ contractual duties are ended, and the contract is no longer valid.

Reformation

Reformation is similar to rescission in that it occurs when parties engage in a contract based on fraud, undue influence, coercion, or mistake; however, rather than dissolving the contract and the parties’ obligations entirely, the court will alter the contract’s substance to address the inequity.

Injunction

An equitable remedy such as an injunction can be interlocutory or required. It could even be prohibitive or limiting in character. A mandatory injunction is a court order that requires something to be done, whereas an interlocutory injunction is intended to keep the status quo of the subject matter in a pending lawsuit. A prohibitory injunction prevents someone from doing anything.

Conclusion

A contract is a legally binding agreement or promise between two or more parties that will be enforced by the courts. In rare circumstances, a party or multiple parties fail to keep their commitments and agreements made in a contract. As a result, this circumstance is known as a breach of contract, which refers to the failure to keep a contract’s promises or terms. When a contract is broken, the parties involved should learn about the available remedies and the implications of breaking an enforceable contract. Suit for specific performance liquidated damages, an injunction is the three major remedies.

References

---

I- Breach of Contract: What Happens Now?, Rocket Lawyer.

II- Breach of Contract Lawsuit: Suing for Breach of Contract, Legal Match.

III- Kellie Pantekoek, Breach of Contract and Lawsuits, FindLaw.

IV- Remedies for a Breach of Contract, HG.Org Legal Resources.

V- Kevin O’Flaherty, What Are Some Remedies For Breach Of Contract?, O’ Flaherty Law.