A breach of contract occurs when any party refuses or fails to meet obligations under the agreed agreement. This is a legally binding contract between two or more parties, either verbally or written. There are many different types of breaches such as anticipatory, minor breach, actual breach, and material breach, each one provides victims with different legal remedies.
Common Causes for Breach of Contract
1. Defective Performance
Conflicts and disagreements between business partners are very common. Those arguments can sometimes become extensive, drawn-out disputes. A minor deviation of the contract isn’t likely to result in a material breach. If the breach is considered minor, you can easily manage it without any long battle.
2. Delay in Goods/or Services Issues
Failing to adhere to the schedule might not be ideal. If any party fails to provide products/ or services in a stated schedule, delay issues may arise. In such cases, a party is entitled to claim for overhead, loss of rent, lost profits, lost productivity, supervisory expenses, and others.
3. Failure to Perform
There is no doubt – failing to perform duties can result in a breach. Any party that fails or refuses to perform has a ripple consequence and damages could spread out.
Consequences of Breach of Contract
When a defaulting party doesn’t adhere to the contract, the non-breaching party can terminate for:
1. The Condition of the Contract
The non-breaching party is allowed to claim damages for the breach and terminate the agreement, which is considered a ‘repudiatory breach of contract.’ In the anticipatory repudiatory breach, the defaulting party clearly convey to the non-breaching party that:
- It will not perform the contract
- It will perform a breach of the contract in future
- And the serious consequences will justify termination
2. A Breach of Warranty
A breach of warranty may restrict the non-breaching party to claim losses. The innocent party can recover damages when a warranty is breached, but cannot terminate the agreement.
3. Different Consequences
The breach of contract itself may carry out potential consequences or any specific class of the agreement. Whether a party is allowed to terminate the contract or not depends on the severity of the consequences in the context of:
- What happened following up on the breach of the term?
- What is expected to happen next, if the agreement is not terminated?
Remedies for Breach of Contract
Damages are certainly the most common remedy. The value of monetary damages that an innocent party will receive depends on specific situations. This may fall into three categories:
- Compensatory damages: compensate the injured party for any actual damages
- Punitive damages: penalize the defaulting party if the breach is intentional, spiteful, or egregious
- Liquidated damages: These are specified in the agreement for potential breaches where damages are hard to evaluate
It terminates the right of the parties involved and strives to put everyone on the same page where they were before entering into a contract.
Reformation is quite similar to rescission as it doesn’t force the parties to work together. Under this, the contract is reformed, which means the obligations and duties of parties will be modified from the original agreement.
4. Specific Performance
It forces the parties to complete the contract or work together as if nothing has happened. This is generally used when the contract involves duties regarding fabricated goods or services. For valid reasons, the tribunal may try not to force parties to perform together once a breach has taken place.
5. Speak to a Legal Specialist
Not all contract-related disputes mean there is a breach occurred. However, pursuing a breach of contract claim might be necessary in some cases.
Before moving ahead, review the contract. There might be a dispute resolution clause given and you may not need to bring the dispute up in a specific manner. Lawsuits can be complicated, which is why it is wise to consult a breach of contract solicitor to take some legal advice on how to make a claim successfully with minimized risks and losses.
Tip: If you’re being liable for a breach of contract or believe the other party has failed to respect its contractual obligations, before proceeding, it is advisable to speak to a solicitor to get advice on the pros and cons of pursuing a breach of contract claim and weigh your best options.
Published by Nick