Key Takeaways

  • An actual breach of contract occurs when one party fails to meet their contractual obligations either by the deadline or during performance.
  • Breaches may vary in severity depending on whether the failed obligation is a core term of the contract.
  • Legal remedies include compensatory damages, specific performance, and contract cancellation with restitution.
  • Proving an actual breach often involves showing a valid contract, a failed obligation, and resulting damages.
  • Non-performance is different from anticipatory breach, which refers to future failure rather than an already missed duty.

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.

How to Prove an Actual Breach of Contract

To prove an actual breach of contract, a party must typically demonstrate the following elements:

  • A valid contract exists — written or oral, with clear terms and mutual consent.
  • Breach of duty — one party failed to fulfill a contractual obligation.
  • Notice of breach — in some cases, the breaching party must be notified.
  • Damages — the non-breaching party suffered financial harm as a result of the failure.

Evidence may include signed agreements, email correspondence, performance logs, or payment records. In litigation, witnesses or expert testimony may also be used to establish the existence and terms of the contract, the nature of the breach, and the financial impact.

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.

Material vs. Minor Actual Breach

An actual breach of contract can be classified as material or minor, depending on the severity and impact of the breach:

  • Material breach: This occurs when the failure is so substantial that it defeats the purpose of the contract. For example, delivering a completely different product than what was agreed upon.
  • Minor breach: A less severe breach, such as a small delay that doesn’t significantly impact the contract’s intent. In such cases, the contract may still be enforceable, though damages may be awarded.

The distinction affects the remedies available, as a material breach typically allows the non-breaching party to terminate the agreement, whereas a minor breach may not.

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.

Factors Courts Consider When Awarding Remedies

Courts assess several factors before awarding remedies for an actual breach of contract:

  • Type of breach: Whether the breach was material or minor.
  • Loss suffered: Measurable financial losses or other harm to the non-breaching party.
  • Mitigation efforts: Whether the non-breaching party attempted to reduce damages.
  • Benefit conferred: Any partial performance or value received that may reduce damages.
  • Foreseeability: Whether the damages were foreseeable at the time of contract formation.

These considerations influence not only the type but also the amount of remedy available to the aggrieved party.

Frequently Asked Questions

  1. What is the difference between an actual and anticipatory breach of contract?
    An actual breach occurs when a party fails to perform as agreed. An anticipatory breach happens when a party indicates, in advance, they will not fulfill their obligations.
  2. Can a minor breach of contract lead to legal action?
    Yes, even a minor breach can lead to a lawsuit, although the remedies may be limited to monetary damages rather than termination of the contract.
  3. Do I need a written contract to prove an actual breach?
    While a written contract helps, oral contracts can also be enforceable if you can provide evidence of the agreement and the breach.
  4. What damages can I recover for an actual breach of contract?
    You may recover compensatory, nominal, or liquidated damages, depending on your losses and the terms of the contract.
  5. Is it possible to fix an actual breach after it happens?
    Sometimes. If the breach is not material and the non-breaching party agrees, the defaulting party may be allowed to cure the breach or renegotiate the terms.

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