Key Takeaways

  • A breach of contract occurs when one party fails to adhere to the agreed terms, often leading to legal action.

  • Common breaches include failing to deliver goods or services, completing a job, paying on time, or providing subpar goods or services.

  • Types of contract breaches include partial, material, or anticipatory, each with different legal consequences.

  • To prove a breach of contract, evidence of a valid contract, a breach of the contract's terms, and actual damages or losses resulting from the breach must exist.

  • Legal remedies for a breach of contract include monetary damages, specific performance, and rescission and restitution, depending on the nature and impact of the breach.

  • Legal expertise can prevent contract breaches and ensure contracts are legally enforceable. Post a job on UpCounsel today to find a contract lawyer near you. 

A breach of contract occurs when one of the parties fails to adhere to the terms of a contract. 

In these cases, it is usually warranted for the other involved parties to pursue legal action for sustained damages or to enforce the execution of the original agreement. 

This article will explain contract breaches, including four types, examples of real-life contract breaches, and the legal remedies that might be applicable.

Breach of Contract Definition

When parties involved in a contract, whether established verbally or in writing, fail to uphold their part of the agreement, they can be determined to be in breach of contract.  

There are a number of ways in which a breach of contract might occur, but the most common include:   

  • Failing to deliver services or goods  

  • Failing to complete a job  

  • Failing to pay in a timely manner  

  • Providing services or goods that are subpar   

In simple terms, a breach of contract occurs when promises are broken or somebody fails to provide things included in the agreement's terms. 

The formal definition of a breach of contract includes the following:   

  • Unjustifiably failing to adhere to the terms of a contractual agreement. 

  • Violating an agreement by failing to perform or interfering with another party's ability to meet their obligations under the contract. 

Breach of contract is among the most common reasons for lawsuits in the United States and can occur in several ways.  

Established laws offer various ways to remedy a breach, designed to make things right for the injured party.  

However, these court-ordered remedies are not designed to act as a punishment for the party guilty of a breach of contract.  

Instead, they are meant to restore the injured party to the position they would have been in if the breach had never happened.

Types of Breach of Contract

There are a number of forms a breach of contract might take, such as:

Partial Breach of Contract

A partial breach involves a failure to perform some part of a contract.  

This type of breach does not entitle the non-breaching party to terminate the contract. However, the non-breaching party can sue for damages caused by the breach. 

These breaches are also called immaterial or minor breaches. 

For instance, if a construction company undertakes to complete a building by a particular deadline and finishes only a portion of the work by that date, this could be a partial breach of contract.  

The non-breaching party, in this case, the client, cannot terminate the entire contract due to this minor breach.  

However, the client can seek compensation for any losses incurred due to the delay, such as additional costs or penalties. 

Material Breach of Contract

A material breach is a failure by one party to perform an essential duty under the contract, jeopardizing the whole contract.  

It is significant enough that the non-breaching party may withdraw from the contract and sue for damages. 

For example, a software company agrees to deliver a fully functioning bespoke software package to a client by a specific date, and the client’s business depends on the software being delivered by then.  

If the software company delivers a system that doesn’t perform the functions it was supposed to, doesn’t perform them properly, or doesn't deliver the services on time, this could be a material breach. The client can terminate the contract and sue for damages.

Anticipatory Breach of Contract

An anticipatory breach occurs when one party tells the other it will break the contract or not fulfill contractual obligations before the performance is due.  

This allows the non-breaching party to take immediate action rather than waiting for the breach to occur.  

An anticipatory breach could occur when a supplier contracts to supply raw materials to a manufacturer by a specific date and tells the manufacturer a week before that date that they will not make the delivery on time.  

The manufacturer may be able to buy the materials from another supplier and sue the original supplier for any additional charges they incur.

Specific Performance Breach of Contract

Specific performance is not a form of breach but a remedy for breach of contract. It is an order by the court compelling the breaching party to perform the contract as specified rather than just paying damages.  

Specific performance is used when monetary compensation would not adequately compensate for the breach, especially in unique items or real estate cases. 

Consider a contract to sell a very rare antique. If the seller backs out of the deal, the buyer can sue for specific performance—to compel the seller to deliver the antique rather than accept a monetary award.  

The court could compel the performance of the contract on the seller’s original terms.

Elements Required to Prove a Breach of Contract

To successfully pursue a lawsuit for breach of contract, certain elements need to exist, including:   

  • Proof a valid contract exists  

  • Proof the contract's terms have been breached  

  • Actual losses or damages   

In other words, this means a contract must be in place to be validated in court.  

However, the contract does not necessarily have to be in writing. Verbal contracts can also be challenged in court.  

Three things need to be established to prove that a valid contract is in place:   

Contractual Offers

In examples of breach of contract cases, an offer includes discussions regarding the agreement to provide services or goods in exchange for something of value. It is also necessary to demonstrate an intention to enter into an agreement with one another.  

Acceptance

Acceptance refers to the act of agreeing to the terms associated with the exchange outlined in the agreement.  

A contract need not be written to be enforceable in court. However, it is usually easier to prove the agreement has been accepted because a legal document specifies the terms each party has agreed to.  

Consideration

Consideration refers to products, services, or some other thing of value that each involved party has received (or intended to receive) as a result of the contract.  

However, if one party promises to provide something without receiving anything in return, it tends to look like a gift.  

This is important because gifts cannot be enforced as considerations, which may prevent the ability to pursue legal action for a breach of contract successfully. 

Additionally, past agreements written to cover the provision of services or goods are not considered valid contracts. A contract needs to be agreed upon before an exchange happens for it to hold up in court.

. 

Legal Remedies for Breach of Contract

The consequences of breaking a contract can vary depending on the scale and type of the breach and other factors. 

Here are some of the potential legal remedies that might be pursued during breach of contract litigation:  

  • Monetary damages: Compensation for financial losses sustained by the breach. They include compensatory, punitive, nominal, and liquidated damages.

  • Specific performance: A court order forcing the party in breach to fulfill the contract instead of paying damages. 

  • Rescission and restitution: The annulment of the contract and the return of whatever goods, services, or funds had been exchanged to return the injured party to their position before the contract was made.

Explanation of When Each Remedy is Applicable

  • Monetary damages are often relevant when the injured party has suffered quantifiable financial losses. This is the most common legal consequence of a breach of contract.

  • Specific performance may be applicable when the subject of the contract is unique, such as land or antiquities, and compensation would be inadequate.

  • Rescission and restitution are potential consequences of breaking a contract when the breach is serious enough that one party wants to rescind the contract and return to its original position.

Famous Breach of Contract Cases

Next, we’ll discuss two real-life breaches of contract cases, each with different outcomes and legal consequences.

Example #1: Compensatory Damages

In 2023, rapper Flo Rida was awarded $82.6M in compensatory damages from Celsius energy drinks. 

Flo Ride (real name Tramar Dillard) said he was instrumental to the company’s growth and wanted the 1% ownership he was promised. 

Celsius’ lawyers say the business decisions after their endorsement deal with Flo Rida caused its success, not the deal with the rapper. 

The suit concerned whether specific benchmarks for stock ownership promised to Flo Rida during the endorsement period from 2014 to 2018 had been met. 

Ultimately, Flo Rida was victorious in this case.

Example #2: Specific Performance

In a 1981 California case involving a land sale agreement, the court examined whether the buyers could enforce the contract despite a liquidated damages clause and the seller’s refusal to proceed.  

The buyers sought specific performance, compelling the seller, Mrs. Sirpuhe Conte (wife of television personality John Conte), to fulfill her obligations.  

The central issues revolved around whether the buyers’ promise was illusory and the contract lacked mutuality of obligation, rendering it unenforceable. 

The court ultimately ruled that the buyers’ commitment to proceed diligently and not unreasonably withhold approval constituted enforceable obligations, ensuring the contract's mutuality.  

The contract was deemed enforceable, so the buyers could enforce it, requiring Mrs. Conte to comply with her contractual duties.

Conclusion: Preventing Breaches of Contract

A contract lawyer’s help is invaluable in preventing costly and time-consuming legal battles. With their legal expertise, you can be confident your contracts are sound and legally enforceable. 

If you need help with a breach of contract case, post a job on UpCounsel's marketplace to find a contract lawyer in your state. UpCounsel accepts only the top 5% of lawyers on its site. 

Lawyers on UpCounsel come from law schools such as Harvard Law and Yale Law and average 14 years of legal experience. This includes work with or on behalf of companies like Google, Menlo Ventures, and Airbnb.