An actual breach of contract refers to a failure to meet the obligations stated in a contract. This means the failure has already occurred and is not something that is merely anticipated. A party can breach a contract in a number of ways, from failing to meet contractual deadlines to complete nonperformance. Fortunately, there are remedies available to help the innocent party get fair compensation for his or her injury or loss.

What Is a Contract Breach?

A contract is a legal document that requires the parties involved to perform certain duties. When one party fails to meet any of the contractual obligations, a breach of the contract occurs. A contract breach might occur due to:

  • Failure to fulfill contractual duties on time.
  • Inability to comply with the terms of the contract.
  • Complete failure to perform.

What Happens After a Contract Breach?

When a contract breach occurs, the innocent party or both parties might choose to have the terms of the contract enforced or try to get compensation for the financial loss resulting from the breach. If there is a dispute over the contract and informal efforts to resolve the dispute fail, the case will most likely go before a court. If the disputed amount is lower than a certain dollar figure, which varies depending on the state, the issue might be resolved in a small claims court.

Filing a lawsuit is not the only option for businesses and individuals involved in contract disputes. Contracting parties might agree to appoint a mediator to review a contract dispute or use binding arbitration. These are two methods of resolving contract disputes out of court.

Types of Actual Contract Breach

An actual breach of contract happens when a party is unable to fulfill his or her contractual obligations by the deadline for performance or during the course of performance.

Actual Contract Breach Due to Late Performance

When one party in a contract does not fulfill his or her contractual duties by the performance deadline, the other party is not required to perform his or her obligations and can hold the breaching party liable for contract breach.

However, the guilty party might express his or her willingness to still perform the contract. In this case, the decision to allow him or her to fulfill the contract will depend on whether time was of the essence in the contract. This means time must be an essential condition for establishing the contract.

If time was indeed an essential factor, failure to meet contractual obligations by the specified deadline is considered a breach of contract. If time was not an essential condition, the nonbreaching party can accept performance and claim damages for late performance.

Actual Contract Breach During the Course of Performance

When one party refuses or fails to perform his or her contractual duties, it results in an actual contract breach during the course of performance. An actual contract breach also occurs if a party performs his or her obligations but fails to comply with the contract's terms. This kind of breach occurs when the guilty party breaches the contract's essential conditions. Nevertheless, a breach of nonessential conditions will not cause the contract to be dismissed. It only gives the innocent party the right to be compensated by the breaching party.

Remedies for a Contract Breach

When a contract is breached, the nondefaulting party can seek remedy or relief under the law. There are several remedies for breach of contract, including:

  • Damages. The payment of monetary or other types of damages is the most common remedy for a contract breach. These can come in the form of compensatory, punitive, nominal, or liquidated damages.
  • Specific performance. If damages do not fully compensate for the loss or injury that has occurred, the innocent party can request the court to award specific performance, which requires the breaching party to perform his or her contractual duties.
  • Cancellation and restitution. A nondefaulting party can choose to terminate the contract and file a restitution claim if he or she has given any benefit to the defaulting party.

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