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
I have been practicing law for 35 years. In addition to my law degree, I hold an MBA. I've created six companies, currently act as outside counsel to another 12, and have been an advisor to more than 100 startups and entrepreneurs.
I am a licensed and active Business Attorney, with over 20 years of diverse legal and business experience. I specialize in contract review, drafting, negotiations, ecommerce business transactions, breach of contract issues, contract dispute and arbitration. I am licensed to practice in New York and Connecticut. I am a FINRA and NCDS Arbitrator. My experience includes serving as General Counsel to small businesses. I negotiate, draft and review a wide array of commercial contracts; provide business strategy and employment advice and assist in the sale of businesses entities. I work extensively with various kinds of contracts. In reviewing agreements, I conduct risk analysis of contract and interpret the terms and conditions so that clients understand exactly what their obligations are under the agreement and are protected as much as the law requires. I am detailed and thorough in my review and drafting of agreements. Additionally, I advise clients on how to limit their liability and lower their contractual risk. I specialize in breach of contract issues and arbitration. I have been a Hearing Officer, presiding over cases and rendering written decisions; a Civil Court Arbitrator presiding over cases in contract law, commercial law, etc., a Judicial Clerk in Civil Court; a Vice President at an Investment Bank and an Attorney at top AML law firms.
Carlos Colón-Machargo is a fully bilingual (English-Spanish) attorney-at-law and Certified Public Accountant (CPA) with over twenty years of experience. His major areas of practice include labor and employment law; business law; corporate, contract and tax law; and estate planning. He is currently admitted to practice law in Georgia, Florida, the District of Columbia and Puerto Rico and currently licensed as a CPA in Florida. He received a Master of Laws from the Georgetown University Law Center in 1997, where he concentrated in Labor and Employment Law (LL. M. in Labor and Employment Law) and a Juris Doctor, cum laude, from the Inter American University.
Graduate of Georgetown Law (J.D. and LL.M in Taxation) Injury Claims Adjuster before law school for top insurer Eight plus years of legal experience Past roles: Associate at premier boutique law firm in the DC metro area Policy Associate at a large academic and research institution Solo Practice Areas of Expertise: Contracts Business Formation Trusts and Estates Demand Letters Entertainment Transactions
As a business law attorney serving Coral Springs, Parkland, and Broward County, FL, Matthew has been recognized as “AV” rated, which is the highest rating an attorney can achieve through Martindale’s Peer Review system. Year after year Matthew is listed in the “Legal Leaders” publication as a top-rated attorney in South Florida in the areas of litigation, commercial litigation, and real estate. Matthew is also a graduate and instructor of the Kaufman Foundation’s FastTrac NewVenture Program, presented by the Broward County Office of Economic and Small Business Development.
John Benemerito is the Founder and Managing Partner of Benemerito Attorneys at Law. Admitted to practice in New York and New Jersey, John represents small business owners and startups in the areas of Business and Securities Law. John received his Bachelors Degree at John Jay College of Criminal Justice where he majored in Criminal Justice. Afterwards, he attended New York Law School where he focused his studies on Corporate and Securities Law. John comes from a family of entrepreneurs. From as far back as he can remember he was always involved in his family’s numerous businesses. At the age of fifteen, John entered into a new business venture with his father and managed to grow and maintain that business through high school, college and law school.John is currently a co founder in over five different businesses. After law school, John decided that he wanted to help people like himself. He opened his own law practice and began working primarily with small business owners until he was introduced into the startup world. Ever since that time, John has worked with hundreds of startups and thousands of entrepreneurs from all different backgrounds in helping them achieve their goals. Having been an entrepreneur his entire life, John understands what it takes to create and maintain a successful business. He enjoys sitting down and working with his clients in figuring out each of their unique challenges.
California-based small business attorney handling matters related to securities, mergers & acquisitions, corporate governance, and other business transactions.
I joined Enterprise Law Group, LLP as an Associate in March 2020. My practice has involved a wide range of legal matters from commercial real estate, finance and international business transactions to litigation matters including commercial disputes, personal injury and medical malpractice. Proficient in Spanish, I graduated from the University of Kentucky College of Law, the Patterson School of Diplomacy and International Commerce, and the University of Southern California. Prior to my legal career, I sought diverse professional experiences. After graduating from college, I orchestrated my own volunteering experience in southern Peru with a small non-profit organization. Later I gained valuable professional experience as part of a U.S. Senate campaign, and after that I joined the public policy team at Greater Louisville, Inc., Louisville's Chamber of Commerce affiliate. Prior to law school, I embarked on a month long excursion with the Northern Outdoor Leadership School in Alaska, which gave me a new found appreciation for sustainability.
Agnes Mombrun Geter is the Founder and Managing Attorney of Mombrun Law, PLLC. She is an experienced attorney and is a member of the Florida Bar, New Jersey Bar, and the Pennsylvania Bar. The firm's practice focuses on Estate Planning, Business Law, and Debt Settlement including IRS Debt Relief. The firm's goal is to simplify the law and provide clients with the confidence and information necessary to make their decisions. The firm also provides project-based legal services to other attorneys and law firms, along with assisting as personal counsel and local counsel on legal matters.
Have over 40+ years of corporate and commercial law experience.
I am a business attorney with years of experience advising individual entrepreneurs and small businesses on issues ranging from entity selection/formation to employment law compliance, to intellectual property protection and exploitation. I often act as General Counsel for my clients fulfilling the legal function as part of a team of managers. I look forward to learning more about your business and how I may be of assistance.