Breach of Implied Terms of Contract
A breach of implied terms of contract occurs when agreement terms that are not expressly stated are not fulfilled.3 min read
A breach of implied terms of contract occurs when agreement terms that are not expressly stated are not fulfilled.
Types of Implied Contract Terms
Implied contract terms can be:
- Implied by the courts when a term that was clearly intended by the parties was not included. This type of implied term must be equitable, reasonable, give efficacy to the contract, be obvious enough to go without saying, be able to be clearly expressed, and not contradict any of the stated contract terms. For example, an implied term by the court could be that purchased goods should be in new condition unless otherwise indicated by the contract.
- Implied by statutes such as the Trade Practices Act of 1974 or the sale of goods act of the state in question. These laws imply that products must be of sellable quality, meet the provided description, and be suitable for the intended purpose.
- Implied by trade usage or custom, which means that the court may imply certain terms that correspond to an established practice. This can be done if the custom in question is well-known, reasonable, and certain. It cannot be done if the implied term is inconsistent with an expressed contract term or an existing statute.
Elements of a Contract
A valid contract must include the following elements:
- The parties involved must intend to create a legally enforceable relationship. The court will examine the nature of the agreement. Social or domestic agreements do not constitute legal intention.
- One party must make an offer that is accepted by the other party.
- Consideration, or an item of value, must be offered by each party. The promisor performs an action that constitutes consideration while the promisee provides financial or other compensation in return.
- Both parties must have the ability to enter a legal contract. Those who cannot do so include minors, intoxicated individuals, and those who are not of sound mind. You can enter a contract if you are bankrupt but in some cases must disclose the bankruptcy beforehand. Corporations have the ability to contract as a separate legal entity.
- The consent of each party must be genuine and not attributable to duress, misrepresentation, error, or undue influence.
- The action or object covered by a contract must not be illegal under state, federal, or local law.
Establishing a Contract Breach
A breach can occur when a business fails to provide services or goods as promised, the goods are defective, services or goods or not paid for, or other restrictive covenants are breached.
To prove that the breaching party was negligent, the following elements must be present:
- The party in question had a legal obligation to maintain a reasonable standard, called the duty of care, if he or she was doing something with the potential to harm others.
- This duty of care was expected but has not been fulfilled.
To examine these elements, the courts consider the care a reasonable person would have taken in a specific situation to prevent foreseeable harm. Factors considered include:
- How much effort would be needed to eliminate the potential risk
- The inherent risk for injury
- The extent of injury that would result from a breach
- Whether the injury in question was caused by the actions of the defendant
Damages for Breach of Contract
If a contract is breached, the party who did not breach the contract may be entitled to financial compensation for damages from the party who committed the breach. Damages are legally limited and cannot be ordered if the breach was too remote.
Common law calls for equitable remedy, but this is not always appropriate in a breach of contract case.
When awarding damages, the court will consider:
- Whether the loss claimed was directly caused by the contract breach
- Whether the loss would be considered to result from the breach by a reasonable person
- Whether the plaintiff was able to mitigate his or her losses
The types of damages that may be awarded include coverage for damage to goodwill or business reputation, economic loss, profit loss, and physical damage.
The court will typically interpret a contract differently when it is between a business and consumer than if it is between a business and another business, particularly when it comes to issues of liability.
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