What Is a Breach of Contract?
A breach of contract occurs when one party does not adhere to their conditions listed in the agreement between two or more parties that outlines a specific exchange of goods or services. Parties can breach a contract either in whole or in part. Common examples of a breach of contract include:
- Not completing a project on time
- Not providing payment on time
- Not meeting the standards presented in the contract
- Not completing the project as outlined in the contract
Identifying a Breach of Contract
In order to prove there's been a breach of contract so that you can seek compensation, you must confirm the following:
- Contractual validity: Before you can bring your case to court, you must prove your contract is valid. This means it contains all essential elements specific to contracts in your state and was signed by all participating parties.
- Breach of terms: You must prove a breach of contract occurred.
- Plaintiff's terms: You have to complete all your obligations described in the contract.
- Prior notice: Prior to suing, you must give notice to the defendant regarding your intent to sue. You can do so verbally, but written notice is easier to use as evidence.
Types of Breach of Contract
A breach of contract can occur in different ways. Understanding the differences between the types of breach of contract can help you identify when it happens. There are four main types of breach of contract — anticipatory, actual, material, and minor.
Anticipatory Breach of Contract
In an anticipatory breach of contract, one party notifies the other to let them know that they won't be able to fulfill some obligation in the contract. This often gives both parties an opportunity to work through challenges and either create a new contract or consider legal action.
Actual Breach of Contract
An actual breach of contract happens when one party fails to perform an obligation as outlined in the contract. Minor and material breaches of contract are both subcategories of actual contract breaches.
Material Breach of Contract
A material breach of contract happens when one party receives less than what was promised in the contract or an entirely different product than what was promised in the contract. The failure can be due to lack of time to complete the project or simply not performing the work as outlined regardless of time constraints.
Minor Breach of Contract
A minor breach of contract is also known as a partial breach of contract or an immaterial breach of contract. Contract failures in this category relate directly to the deliverable. The receiving party gets the product or service, but it may be late or missing minor elements. In order to seek damages, the receiving party must prove that the breach of contract resulted in a financial loss of some kind.
Breach of Contract and Lawsuit
Usually, the first step after a breach of contract occurs is to try and remedy the situation through mediation of non-legal means. However, if this approach is unsuccessful, the wronged party might seek a legal remedy through a lawsuit. The amount of money in question will determine whether you can enforce the contract in small claims court or large claims court.
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Breach of Contract Remedies
When a breach of contract occurs, there are usually three general remedy options for the wronged party — damages, specific performance, and cancelation and restitution.
Damages, or payment, are the most common type of remedy for a breach of contract. Damages come in many forms and can depend on the industry, terms of the contract, and desires of the parties involved in the lawsuit. A few common types of damages include:
- Compensatory damages: This remedy attempts to repay the wronged party an amount that returns them to their financial standing prior to entering the contract.
- Punitive damages: These damages provide additional compensation to the wronged party for any pain or suffering. It's rare to see punitive damages applied to a breach of business contract, but it's not unheard of.
- Nominal damages: Usually, nominal damages are a small sum meant to compensate the wronged party for a partial breach of contract in which there was no financial loss.
- Liquidated damages: Some contracts list "liquidated damages" as part of the agreement. Should a breach occur, these are the damages awarded to the wronged party.
The specific performance remedy involves the judge ordering the party at fault to complete a specific action, project, or obligation in place of damages. This is a rare remedy, and it is only used if monetary compensation could not replace or rectify the damage done through the breach of contract.
Cancelation and Restitution
Cancelation and restitution is a two-part remedy. First, the wronged party chooses to cancel the contract rather than seek specific damages. Then, they can sue the breaching party for restitution equal to whatever benefit the wronged party provided to the breaching party. Essentially, cancelation and restitution resets the wronged party to their financial state prior to the breach.
Breach of Contract Defenses
There are some defenses the breaching party can use if the breach of contract was out of their control. Common defenses include:
- Fraud: The breaching party can use the fraud defense if the wronged party misled them in some way during the contract negotiation and signing.
- Capacity: If the breaching party did not have the competency to enter a contract, either mentally or because they were underage when they signed, the judge can void the contract.
- Illegality: Contracts that outline illegal activity, such as theft, are unenforceable in a court of law.
- Mutual mistakes: Occasionally, the parties both misunderstood the intent or terms of their contract, leading to mutual mistakes or confusion.
- Duress: If the breaching party was forced into the contract under duress, the contract can be voided.
- "Dirty hands": This defense involves proving that both parties committed wrongdoing in the course of the contract.
- Statute of Frauds: Some states require contracts be in writing in order to be enforceable.
- Unconscionable contract: Sometimes, one party receives far more benefit from a contract than the other party. The judge can deem these contracts void.
Avoiding Breach of Contract
To avoid breaching a contract, it's vital you understand all the specifics and terms within the contract. During negotiations, ask any questions you have, double-check deadlines, and request any examples or clarity from the other party. Create a schedule for yourself to ensure you're meeting all deadlines and will have the final project delivered on time to avoid any contract breaches.
How to Handle a Breach of Contract
Should you breach a contract or should another party breach a contract and wrong you, it's best to consult a contract lawyer for guidance . They can review the contract and help you establish breach of contract necessities like what type of breach occurred, mediation, or legal representation in court if needed.
A clear, well-defined contract is the best way to avoid a breach of contract or to seek damages in the case of a breach. Connect with a contract attorney if you need assistance drafting a contract or seeking legal remedy for another party's wrongdoing.
Meet some of our Breach of Contract Lawyers
Diana is a registered patent attorney and licensed to practice law in Florida and in federal courts in Florida and in Texas. For nearly a decade, Diana has been known as the go-to brand builder, business protector, and rights negotiator. Diana works with individual inventors, startups, and small to medium-sized closely held business entities to build, protect, and leverage a robust intellectual property portfolio comprising patents, trademarks, copyrights, trade dress, and trade secrets.
Brandon is a Texas Super Lawyer®, meaning he is among the top 2.5% of attorneys in his state. He has designed his practice to provide a unique ecosystem of legal support services to business and entrepreneurs, derived from his background as a federal district law clerk, published biochemist, and industry lecturer. Brandon is fluent in Spanish, an Eagle Scout, and actively involved with the youth in his community. He loves advocating for his clients and thinks he may never choose to retire.
Firm rated best ADR firm for Wisconsin and won an award for cultural innovation in dispute resolution from acquisition international magazine in 2016 and it was rated "Best of Brookfield" by Best Businesses in 2015. Attorney Maxwell C. Livingston was rated 10 best in Labor & Employment Law by American Institute of Legal Counsel and 40 Under 40 by American Society of Legal Advocates for 2016; he also won 10 Best by American Institute of Family Law Attorneys. He is licensed in Wisconsin in all state and federal courts, and in the 7th Circuit Court of Appeals, wherein he won a landmark decision in McCray v. Wielke.
Richard is a wizard at taking on bureaucracies and simply getting the job done. His clients value his straight-forward counsel and his ability to leverage a top-notch legal staff for efficient and effective results. Richard is a professional engineer, professor of law, and has been named among the top 2.5% of attorneys in Texas by the Super Lawyers®. When he is not driving results for his clients, Richard can be found with his small herd on his Texas homestead.
Experienced attorney and tax analyst with a history of working in the government and private industry. Skilled in Public Speaking, Contract Law, Corporate Governance, and Contract Negotiation. Strong professional graduate from Penn State Law.
I am an attorney admitted in NY, with over 6 years of experience drafting, reviewing and negotiating a wide array of contracts and agreements. I have experience in Sports and Entertainment, Real Estate, Healthcare, Estate Planning and with Startup Companies. I am confident I can assist you with all of your legal needs.
Rishma D. Eckert, Esq. is a business law attorney who primarily represents domestic and international companies and entrepreneurs. A native of both Belize and Guyana, she remains engaged with the Caribbean community in South Florida: as a Board Member and General Counsel for the Belize American Chamber of Commerce of Florida, and Member of the Guyanese American Chamber of Commerce. She holds a Bachelor of Laws degree (LL.B.) from the University of Guyana in South America, a Master’s degree in International and Comparative Law (LL.M.) from Stetson University College of Law in Gulfport, Florida, and earned a Juris Doctor degree (J.D.) from St. Thomas University School of Law in Miami, Florida. Licensed to practice in the State of Florida and the Federal Court in the Southern District of Florida, Mrs. Eckert focuses her passion and practice on domestic and international corporate structuring and incorporation, corporate governance, contract negotiation and drafting, and trademark and copyright registrations.
Mark A. Addington focuses his practice primarily on employment litigation, including contractual disputes, restrictive covenants (such as non-competition, non-solicitation, or confidential information restrictions), defense of wage and hour, harassment, retaliatory discharge, disability, age, religion, race, and sex discrimination.
Founder and Managing partner of Emerald Law, PLLC, a business law firm specializing in contract drafting and corporate transactions. Kiel worked as in house counsel for a variety of companies before launching his own firm, and most recently served as the Chief Legal Officer for an international private equity firm.
Jay Pink is an attorney who works with businesses and families on estate planning, and business law matters. Having his CPA license, and working in multiple family businesses over his career has positioned him to provide valuable insight on successful business operations. He has formed many entities - LLC's, Corps Partnerships and non-profit organizations.
Skilled in the details of complex corporate transactions, I have 15 years experience working with entrepreneurs and businesses to plan and grow for the future. Clients trust me because of the practical guided advice I provide. No deal is too small or complex for me to handle.