What is Breach of Contract?

A breach of contract occurs anytime individuals enter into an agreement and then at least one party fails to fulfill their part of the contract terms without a legal excuse as to why they did so. When all parties reach an agreement, each one is required to fulfill their obligations, making the contract legally enforceable. Here, we want to examine how breaches of contract can occur as well as the consequences of a breach of contract.

Understanding How a Breach of Contract Occurs

Contracts are very common, but often, they are mired in legal language that can be difficult to understand. It should come as no surprise that breaches of contracts are also not uncommon. Sometimes, contracts are pages and pages long, and the details can get lost as days go by after signing the dotted line.

A breach of contract will occur anytime a party involved in the contract fails to uphold their end of the obligations stipulated in the signed agreement.

The Consequences of Breaching of Contract

When a person enters into a legal agreement with another party, the contract will often stipulate the consequences of breaching the agreement. For example, a contract may say that one party is required to pay a fine for being one day late on a payment that is supposed to be made to a party. Other consequences could include clauses to immediately end the contract. Essentially, there could be any type of consequence written into a contract, so long as the parties involved agree (within reason and so long as the consequences are legal).

If a breach of contract does occur, the first step is not generally rushing to court. Often, the parties involved will come together and either work to find a solution to the breach or to create a new contract altogether, taking into account anything that has arisen since the original contract was signed. In the event a new agreement cannot be reached, the next course of action could include mediation, arbitration, or a lawsuit in civil court.

In the event one party is successful in their breach of contract claim against another party, they may be able to recover various types of damages or other orders against the other party. This could include punitive damages if the breach of contract involved bad faith, ordering the other party to fulfill their contractual obligations, or canceling the agreement and ordering the other party to return any benefits they have received up to that point.

Types of Breach of Contract

Some of the various types of breaches of contracts include:

Minor

A minor breach of contract could include something like one party delivering goods or services, but not delivering on time. This is particularly important if the contract does stipulate that time is of the essence, and the deadline is missed.

Material

A material breach of contract happens when one party violates a significant portion of the contract. The broken part of the contract will be at the heart of the contract and inevitably break the entire contract because of the breach. For example, a breach of contract would occur if a person ordered bleach but received utensils instead.

Anticipatory

An anticipatory breach of contract occurs if one party knows that they will not be able to fulfill their part of the contract in advance.

Actual

An actual breach of contract happens when one party completely fails to meet the terms of the contractual obligations. The other party will then have to decide what is the best course of action to take from there.

Mutual

Mutual breach of contract includes both parties wanting to breach the contract and both parties deciding to back away.