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
Jaclyn is an experienced intellectual property and transactional attorney residing and working in NYC, and serving clients throughout the United States and internationally. She brings a targeted breadth of knowledge in intellectual property law, having years of experience working within the media, theater, PR and communications industries, and having represented clients in the music, entertainment, fashion, event production, digital media, tech, food/beverage, consumer goods, and beauty industries. She is an expert in trademark, copyright, and complex media and entertainment law matters. Jaclyn also taught as an Adjunct Professor at Cardozo School of Law, having developed and instructed the school’s first Trademark Practicum course for international students. In her spare time, Jaclyn’s passion for theater and love for NYC keeps her exploring the boundless creativity in the world’s greatest city!
A bilingual attorney graduated from J.D. with a C.P.A. license, an M.B.A. degree, and nearly ten years of experience in the cross-border tax field.
Experienced and business-oriented attorney with a great depth of contract experience including vendor contracts, service contracts, employment, licenses, operating agreements and other corporate compliance documents.
With over 21 years of practice, Chet uses his vast experiences to assist his clients in the most efficient manner possible. Chet is a magna cum laude graduate of University of Miami School of Law with an extensive background in Business Law, Commercial Real Estate, Corporate Law, Leasing Law and Telecommunications Law. Chet's prior experience includes 5 years at two of the top law firms in Georgia and 16 years of operating his own private practice.
Steve Clark has been practicing law in DFW since 1980. He is licensed in both Texas and Louisiana state and federal courts. He concentrates his practice on business clients and their needs. He has been a SuperLawyer in Texas since 2011, and is Lead Counsel rated in Business Law. He is also a Bet the Company litigator in Texas.
I am a top-performing bi-lingual legal services professional with a proven record of success. Reputation of assessing and evaluating client’s needs and providing individualized solutions in line with those needs while efficiently handling multiple tasks simultaneously. Able to create a collaborative work environment ensuring business objectives are consistently met. Seeking an attorney role within a legal setting to apply skills in critical thinking, executive communications, and client advocacy.
I run a small law firm in Pasadena, CA. I have been practicing for almost 10 years and the other attorneys at my firm each have 12+ years of experience. We focus on business and employment law, protecting and defending business owners. While my clients are all sizes, I particularly enjoy helping smaller companies and individuals manage their legal needs without the high price tag.
I have over 25 years' experience representing individual and company clients, large and small, in transactions such as mergers and acquisitions, private offerings of securities, commercial loans and commercial endeavors (supply contracts, manufacturing agreements, joint ventures, intellectual property licenses, etc.). My particular specialty is in complex and novel drafting.
I assist individuals and businesses across the state of Florida with contract drafting, contract interpretation, and issues that may arise because of contract terms, including demands (cease-and-desist letters) and litigation. I have experience with general service contracts, non-compete agreements, settlement agreements, and many other contracts. Please reach out if I can help you with a contract-related project!
Brianna is a well-respected attorney with a juris doctorate degree in law from Touro College Jacob D. Fuchsberg Law School and bachelor’s degree in Business Administration and Management from Dowling College. Since becoming an attorney, she has practiced in various areas including business law, real estate, employment law, estate planning, and more. Brianna has very broad and extensive business experience; She is an entrepreneur and co-owner of a manufacturing company that was built by her and her partner, where she also served as the Chief Legal Officer/General Counsel and Human Resource Manager for the company. She has been involved in business for over 15 years, thus she offers a very unique skillset to her clients; not only does she understand contractual principals and obligations from a legal perspective while drafting and negotiating agreements, but she also has the foresight and ability to ensure the agreement reflects the practical aspects of the business. Based on the client’s needs and desired outcome, she has the forethought to cover different angles that would be overlooked from a legal standpoint but be of consequence in business. She conducts risk assessments and minimizes client’s risk and exposure to potential liability. Additionally, she specializes in drafting and negotiating agreements. Negotiating is a passion of hers; in law school, she was a member of the Alternative Dispute Resolution Society and won the intraschool negotiation competition. Brianna believes in quality over quantity. She treats every client as a top priority; thus she will not take on many cases at a time because she wants to give each client the focus and attention they deserve. She has sharp attention to detail and is a forceful advocate for every client.