Breach of contract is a legal cause of action and a type of civil wrong, in which a binding agreement or bargained-for exchange is not honored by one or more of the parties to the contract by non-performance or interference with the other party’s performance. Breach occurs when a party to a contract fails to fulfill its obligation(s), whether partially or wholly, as described in the contract, or communicates an intent to fail the obligation or otherwise appears not to be able to perform its obligation under the contract. Where there is breach of contract, the resulting damages will have to be paid by the party breaching the contract to the aggrieved party.
If a contract is rescinded, parties are legally allowed to undo the work unless doing so would directly charge the other party at that exact time.
It is important to bear in mind that contract law is not the same from country to country. Each country has its own independent, free standing law of contract. Therefore, it makes sense to examine the laws of the country to which the contract is governed before deciding how the law of contract (of that country) applies to any particular contractual relationship.
A breach of contract is a material non-compliance with the terms of a legally binding contract.
Enforcement of contracts is a necessary part of any legally binding contract: each party expects to obtain the benefit of the deal agreed by the contract.
If a party doesn’t receive the benefit of the contract by reason of the other party’s breach, the innocent party has a legal right to recover compensation for their loss in damages.
Business agreements are the centrepiece of commerce. Without contracts, there is no business.
It pays to know how they work, and when they’re breached.
What is a Breach of Contract?
Each party to a contract is entitled to perfect performance of the terms of the contract by the other party.
A party will be in breach of the contract – or break the contract – when they fail to perfectly perform one of the warranties, conditions or innominate terms (ie the terms of the contract) they have promised to perform.
The most common forms of breaches of contract are:
- defective performance: where the contract is partly performed but not to the standard required by the contract
- delayed performance: where a party does not perform on time, in accordance with the time frames required by the contract
- complete non-performance: a party does not do anything to perform the contract.
The consequences of a breach of contract depends upon the type of term which has been broken.
Breach of Contract Claims
There are a whole lot of moving parts when it comes to suing for breach of contract claims.
You have to set out the claim out in the particulars of claim, and prove the facts giving rise to the breach on the balance of probabilities to obtain a remedy.
When suing for breach of contract, there are several steps to go through to prepare the particulars of claim to include the essential ingredients and make out a cause of action for breach.
When you’re on the other side – in breach of contract and receiving threats of litigation – taking advantage of mistakes by your counterpart can be fatal to their claim. The windows of opportunity usually don’t last long.
It’s actually quite easy to mess up a perfectly good legal claim for damages for breach of contract. Some businesses breaching contracts and leaving the innocent party in the lurch count on it.
In a clear-cut, indefensible case, a summary judgment application might be warranted. If a claim is not defended, default judgment is available to get judgment quickly. In either case, the claimant can move onto enforcement quickly.
Remedies for Breach of Contract
In contract law, a breach of contract gives rise to a cause of action where the innocent party has:
- a right to monetary compensation, that is, damages for failures to perform the contract
- if it’s serious enough, the right to terminate the contract
- in some cases, may obtain specific performance of the contract, or an injunction to restrain further breaches of contract.
Even then though, the terms of a contract can seriously limit or expand the rights of an innocent party to damages and the other remedies which might be available.
When that happens, remedies that:
- would have been available are excluded, and
- might not have been available are accessible to the innocent party.
The consequences of a breach and the consequences of termination are quite different things. The consequences of a breach depends on the terms of contract itself and what the innocent party does when there is a breach of contract.
Breach of Contract Claims: How it Works
- What are the Elements of a Breach of Contract?
- express contracts and implied contracts
- express terms and implied terms
- Types of Terms of Contracts
- Consequences of Breach of Contract: What Happens?
- Repudiatory Breach
- Anticipatory Repudiatory Breach
- Assessing Repudiatory Breach
- What happens after a Repudiatory Breach?
- Affirmation and Repudiatory Breaches
- Consequences of Affirmation
- Consequences of Termination in contract law
- Alternatives to Repudiatory Breach
- Material Breach
- Fundamental Breach
- Substantial Breach
- Serious Breach
- What about “any breach” of contract?
- What if there’s no termination clause at all?
- Illegal Contracts v Breach of Contract