Breach of Obligation Definition: Everything You Need to Know
The breach of obligation definition simply states that a default or a breach has occurred on one or more parties who have signed a contract.3 min read
The breach of obligation definition simply states that a default or a breach has occurred on one or more parties who have signed a contract. Contractual obligations are outlined in a contract. After the contract has been signed, it is legally binding. If one or more parties fails to meet his or her obligations, a breach has occurred.
Are Breach and Default the Same Thing?
It is important to understand that although breach and default basically mean the same thing, in some contracts, they may point toward separate meanings. When a contract is created, two parties have made an agreement with one another. These promises must be fulfilled or legal ramification can take place.
Unless there is a legal excuse, a breach of contract usually entails some type of consequence. When someone defaults on a contract, this means they have failed to uphold their promise. For example, if a person borrows $10,000 for a car from a bank and fails to make one of his or her monthly payments, this means the loan has gone into default.
In some instances, a breach of contact can take place over a single action. In others, multiple actions, or lack of actions, may have to take place in order for a breach to occur. For example, some banks don't consider mortgage loans to go into default until a loan holder has missed three consecutive payments.
Importance of Obtaining a Remedy
When a breach has occurred, it is very important for the person who has defaulted to attempt to remedy the situation. If he or she does not, the non-defaulting party may have the right to take the defaulting person to court and sue for damages. Much of the time, taking the defaulting party to court will compel him or her to seek a remedy. At this point, the person is not sued but it is made very clear that, unless a remedy is achieved, a lawsuit will take place.
Understanding Contract Language
Contracts usually specific languages and there is often a section in a contract that explicitly details how the words and terms in the contract are to be understood. This section is likely to go into great detail as to how the word "breach" and "default" are to be understood as well. You will likely learn that default and breach have two different meanings according to the contracts they are being used in.
Assume you have obtained a lease on a piece of rental property and your contract specifically states how long you are able to rent the property and at what price you must pay. However, it also states that you cannot use the property for any type of commercial purpose. This lease goes on to say that if you fail to make your rental payments, then you will be considered as going into default.
On the other hand, it states if you end up using the rental property for commercial purposes, this is considered a breach of contract. This means that you very well could default on your contract but not breach it. Just because you default doesn't mean you breach, and just because you breach doesn't mean you default. This is why it is of the utmost importance that you carefully review the terms and conditions of the contract to ensure you understand how you can avoid both defaulting and breaching.
It is possible for a person who has breached or defaulted on a contract to create a strong defense case and actually win by saying the contract shouldn't be enforceable due to inherent flaws.
How to Get out of a Contract
Once you have gone into a contract with someone, there are only a few ways to get out of it:
- All involved parties agree to terminate the contract.
- You must prove that it's unconscionable to stay in it.
- That it's not in the best interest of the public for you to stay in it.
- That both parties agreed to the terms and conditions of the contract by mistake.
- The breaching party was in one way or another coerced into signing it, either by duress or undue influence.
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