1. Breach of Contract Definition
2. What Happens When a Contract Is Breached?
3. Breach of Contract Remedies

A breach of contract terms and conditions occurs when one or more parties involved in a contractual agreement fail to meet their obligations and duties under the terms of the contract.

Breach of Contract Definition

Business contracts normally create specific obligations that the involved parties are expected to fulfill. Legally speaking, if one party fails to fulfill their obligations under the contract, they are considered to be in "breach of contract." Depending on the specific circumstances, a breach of contract can happen when a party involved in a contract:

  • Fails to perform their duties on time
  • Fails to perform in accordance with the contract terms
  • Fails to perform at all

A breach of contract is normally categorized in one of two ways:

  • Material
  • Immaterial

This classification serves to determine the appropriate legal solutions, otherwise known as "remedies," that should be employed in response to the breach in question.

Simply put, a breach of contract is what happens when the terms of the contract are broken as a result of one party or another's failure to fulfill their obligations without a justifiable excuse under established laws. This could happen in situations such as:

  • When a co-worker either refuses or fails to adequately perform their part of a job
  • When employees do something that their job contract prohibits
  • When customers prevent contractors from completing a job

In other words, a breach of contract is the result of an involved party failing to meet their obligations without an excuse that is valid according to relevant laws. If one of the involved parties fails to perform their duties and the other doesn't the party that is performing has the right to pursue legal action against the breaching party.

What Happens When a Contract Is Breached?

In the event that a breach of contract has occurred, or is alleged to have occurred, one or more of the involved parties might want to enforce the terms of the contract or attempt to recover any damages that have arisen as a result of the breach. When a dispute does arise and informal resolution attempts have failed, legal action is the most common next step. If the financial amount in question is below established dollar amounts, the involved parties might be able to resolve the dispute in small claims court. This number is normally between $3,000 and $7,500, depending on your specific state.

A formal lawsuit isn't the only option for resolving a contractual dispute, though. The involved parties might agree to bring in a mediator to review the contract in question and examine the dispute. Another option is to agree to participate in binding arbitration in the event of a contract dispute. These two options are commonly referred to as "alternative dispute resolution" methods.

Breach of Contract Remedies

When a breach of contract occurs, the non-breaching party or parties are entitled to seek what is known as "remedies" under the laws that pertain to contract enforcement. There are three main remedies that can be pursued in the event of a breach of contract:

  • Damages
  • Specific Performance
  • Cancellation and Restitution

The remedy options that are available for your specific contract will be listed in the contract itself. Before you consider taking any legal action in the event that a breach of contract does occur, it's a good idea to review the initial agreement as carefully as possible and look out for any requirements or limitations that might exist in an effort to avoid waiving any available remedies unintentionally.

Pursuing remedies for damages involves one party paying the other for any financial losses they may have incurred as a result of the breach. This is the most commonly sought-after remedy when a breach of contract takes place. The intent of compensatory damages of this nature is to place the non-breaching party in a position similar to the one they would have been in had the breach of contract not occurred in the first place.

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