Contract Suit: Everything You Need to Know
A contract suit is a legal action that occurs for a variety of reasons, including a breach of contract. 3 min read updated on January 01, 2024
A contract suit is a legal action that occurs for a variety of reasons, including a breach of contract. You must be able to show that a valid contract existed between you and another party before pursuing a contract suit.
What Is a Breach of Contract?
Legally, a breach of contract is one party's failure to fulfill its contractual obligations outlined in a contract. Contracts create certain obligations that must be fulfilled by the parties entering into the agreement, and failure to meet those obligations could be grounds for legal action.
Depending on the contract, a breach can occur when a party fails to perform all or certain responsibilities included in the contract terms. A breach can also occur if those responsibilities are not completed on time. A contract breach is typically categorized as either “immaterial” or “material” for the purposes of determining what legal solution is the best course of action for remedying the breach.
Material Breaches of Contract
A material breach of contract occurs when one party incorrectly performs or doesn't fulfill their obligations, resulting in bigger consequences for the entire agreement. When a material breach occurs, the party affected by these actions can end the contract without upholding their own responsibilities.
Courts determine if a breach is considered material based on these factors:
- Is compensation to the affected party possible?
- Was the mistake innocent, intentional, or based on negligence?
- Will the breaching party be able to complete their obligations to the other party?
- How much of the contract was affected by the breach?
- How much benefit did the other party already receive from the contract?
- What effects would the affected party's excusal have on the breaching party?
Since there are so many factors involved in determining whether a breach is material, courts look at each individual situation and make decisions on a case-by-case basis.
Minor Breaches of Contract
A minor or partial breach of contract is when one party fails to complete a part of the contract's requirements. When a minor breach occurs, the party at fault must compensate the other party for unfulfilled duties. The other party is still required to maintain their end of the bargain and abide by their contractual responsibilities.
In some cases, a seemingly minor detail results in a significant breach of contract, impacting the rest of the agreement.
Other Types of Contract Breaches
Although material and minor breaches may seem similar, they are not the only types of breaches involved in contracts. A total breach occurs when a party fails to complete any contractual responsibilities.
An anticipatory breach is when one party intends not to uphold the contract, and the other party realizes this intention in advance.
If you're not sure which type of breach might have occurred in your situation, consult with a lawyer for more information.
An Example of a Breach of Contract
Business contracts are among the most common types of agreements. As an example, let's assume that John Doe contracts with Acme Farms for the purchase and delivery of some of its products. The delivery is scheduled for the following Tuesday evening.
If Acme Farms delivers its goods the following Wednesday morning, the breach of contract would probably be considered immaterial, and John Doe wouldn't be entitled to receive any monetary damages unless he can prove he was damaged by the late delivery.
But if the contract clearly stated that “time is of the essence,” Acme Farms must deliver its goods by Tuesday evening. Failure to do so is considered a material breach of contract and John Doe can make the company liable for damages. John Doe may not even have to pay for the products or delivery charge under contract.
What Happens After a Contract Breach?
When a breach of contract occurs, the parties may try to enforce its terms on their own, or one party might pursue legal action. The most common resolution for a contract breach involves a lawsuit.
A formal lawsuit isn't the only option for resolving contract disputes. You may opt to have a mediator review the dispute or agree on binding arbitration. These out-of-court options are considered alternative dispute resolutions and can be just as effective as going to court.
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