Key Takeaways

  • A cause of action for breach of contract arises when one party fails to fulfill their contractual obligations, justifying legal action.
  • A valid contract must exist with offer, acceptance, and consideration for it to be enforceable.
  • The breach must cause measurable harm or loss to the non-breaching party.
  • Breaches can be material, minor, actual, or anticipatory, each with different legal consequences.
  • Legal remedies include damages, specific performance, rescission, or reformation.
  • Defendants may raise defenses such as lack of capacity, duress, mistake, or unconscionability to avoid liability.
    Cause of action breach of contract occurs when one party to a contract breaches the contract so severely that the non-breaching party is justified in suing the breaching party for money, property, or the enforcement of an action.

What Is a Contract?

Contracts are lawfully executed and enforceable agreements, such as a service or job rendered, or the purchase of a product. If one of the parties to the contract doesn't hold up to their end of the bargain, then the other party may be able to sue for breach of contract.

To be enforceable, a contract must have these three attributes:

  1. A valid contract must exist: Proof must exist that someone made a proposition and that it was accepted by another party. Additionally, some sort of consideration must be exchanged between the two parties.
  2. The terms for a breach of contract: A lawsuit may be filed in situations where a breach of contract causes the non-breaching party a loss or subtraction in value. Typically, small breaches of contract are not filed because they most likely wouldn't hold up in court. On the other hand, larger breaches are much more severe and may result in a lawsuit.
  3. Damages resulted from the breach of contract: Once the non-breaching party is able to prove that the breaching party caused a loss to them, the court will most likely award damages to the non-breaching party in order to cover any lost time, lost money, and other expenses. In serious cases, punitive damages and/or restitution may be granted to the non-breaching party in order to punish the breaching party.

Types of Breach of Contract

Not all breaches are created equal. The law recognizes different types of contract breaches, each with varying degrees of severity and legal consequences:

  • Material Breach: This occurs when one party fails to perform a key part of the contract, making it impossible for the other party to receive the agreed-upon benefit. A material breach typically allows the non-breaching party to terminate the contract and seek damages.
  • Minor (Partial) Breach: Here, the breach is relatively small and does not destroy the overall purpose of the contract. The non-breaching party must still fulfill their obligations but can seek damages for the shortfall.
  • Anticipatory Breach: This happens when one party indicates—through words or actions—that they will not fulfill their contractual obligations before the performance is due. The other party can immediately pursue legal remedies.
  • Actual Breach: This is a straightforward failure to meet contractual obligations by the due date or in accordance with the agreement’s terms.

Understanding the nature of the breach is critical to determining appropriate remedies and the likelihood of prevailing in court.

Civil Causes of Action — Breach of Contract Law and Legal Definition

In legal terms, a breach of contract amounts to a broken agreement or promise to take or not take action. Breaches of contract may stem from one specific act, numerous acts, or continuing acts of neglect. A civil lawsuit may be filed against the breaching party in order to bring the non-breaching party to the position they were in, prior to the breach.

A contract as a document often refers to a written or verbal agreement that is legally enforceable. In specific situations, it is highly recommended for parties in an agreement to have a written contract in order to appease the Statute of Frauds. According to the statute, certain matters must be written in order to be ruled as evidence.

Legal Remedies for Breach of Contract

When a cause of action breach of contract is successfully proven, the court may provide several types of remedies to address the harm:

  1. Compensatory Damages: The most common remedy, compensatory damages are intended to cover the actual losses suffered due to the breach.
  2. Consequential Damages: These damages account for indirect losses that occur as a foreseeable consequence of the breach (e.g., lost profits).
  3. Liquidated Damages: If the contract includes a clause specifying a predetermined amount of damages, courts may enforce this if it is reasonable and not punitive.
  4. Specific Performance: Instead of monetary compensation, the court may order the breaching party to fulfill their contractual obligation. This is common in real estate or unique goods transactions.
  5. Rescission: The contract is canceled, and both parties are relieved of any further obligations.
  6. Reformation: The contract is rewritten to reflect the true intentions of both parties, often used in cases involving misrepresentation or mistake.

These remedies aim to place the non-breaching party in the position they would have been in if the contract had been fully performed.

Common Causes of Contract Breaches

A cause of action breach of contract can arise from various business or personal scenarios. Some of the most common causes include:

  • Failure to Deliver Goods or Services: One party does not provide the product or service agreed upon.
  • Missed Deadlines: When timing is essential to a contract, failure to meet deadlines can constitute a breach.
  • Nonpayment: A party fails to pay for goods or services as outlined in the agreement.
  • Violating Confidentiality or Non-Compete Clauses: Particularly in employment or partnership contracts, these clauses are legally binding.
  • Poor Quality or Substituted Performance: Delivering subpar goods or services not aligned with contract terms can lead to breach claims.

Identifying the exact cause helps in determining whether legal action is warranted and what remedies are applicable.

Defenses to Breach of Contract

In order to avoid liability, defense lawyers use a number of strategies, including:

  1. The contract is not written: The Statute of Frauds insists that certain agreements must be written. In other words, oral agreements are not acceptable forms of evidence. The agreements below indicate circumstances where a written contract must be created:
    • Sale of goods exceeding $500
    • Sale of real estate
    • Agreements that exceed a person's life
    • Agreements that will not be completed in less than one year
    • Obligations to pay another person's debt
  2. The contract created was not the intended agreement: If the contract evolves into a format that is not how the original contract was originally intended, defense lawyers may argue that outside arrangements agreed to by the non-breaching party changed the intention of the original contract.
  3. A minor carried a leading role in the contract: If a defense lawyer can prove that the non-breaching party was a minor when the contract was negotiated, then a breach of contract can occur without holding the breaching party liable.
  4. Mental capacity: Generally, parties that enter into a contract that is intoxicated, minors, or lack the ability to control or understand their behaviors are considered as inadmissible parties to form a legal contract.
  5. Undue influence or duress: Undue influence or duress generally stems from at least one of the parties in a contract being under intimidation or extreme pressure. In this circumstance, the court may side with the breaching party. If both parties enter into a contract, and both parties bilaterally created the contract in error, it may be void. If only one of the parties was mistaken, then liability is still possible.
  6. The contract is deemed unconscionable: If an agreement is allegedly made between two parties that appear to be so obviously skewed and unfair that no reasonable person would enter into it, the courts will most likely state that the contract is unconscionable.

Proving a Cause of Action Breach of Contract

To succeed in a breach of contract lawsuit, the plaintiff must prove the following essential elements:

  1. Valid Contract: Demonstrate that a legally binding agreement existed, whether written, oral, or implied.
  2. Plaintiff’s Performance: The plaintiff must show they fulfilled—or were ready to fulfill—their obligations under the contract.
  3. Defendant’s Breach: Clear evidence must establish that the defendant failed to meet their contractual duties.
  4. Resulting Damages: The plaintiff must show measurable damages caused by the breach.

Courts often examine surrounding evidence such as communications, actions taken by each party, and industry standards when assessing these elements.

Frequently Asked Questions

  • What is a cause of action breach of contract?
    It refers to the legal grounds upon which a party sues for failing to fulfill obligations under a valid contract.
  • Can verbal contracts lead to a breach of contract lawsuit?
    Yes, but only in situations not barred by the Statute of Frauds. Some contracts—like those involving real estate—must be in writing.
  • What types of damages can I claim for breach of contract?
    Common types include compensatory, consequential, liquidated, and, in some cases, punitive damages.
  • How do I prove a breach of contract?
    You must show a valid contract existed, you met your obligations, the other party breached the agreement, and you suffered damages as a result.
  • What is the difference between material and minor breaches?
    A material breach significantly impacts the contract's purpose and may justify contract termination. A minor breach allows for damages but not termination.

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