How to Sue for Breach of Contract
Knowing how to sue for breach of contract is essential when one party renegades on its contractual obligations.3 min read
2. Material Breach
3. Fundamental Breach
4. Anticipatory Breach
Knowing how to sue for breach of contract is essential when one party renegades on its contractual obligations. When a binding contract is drawn up, there are certain duties and responsibilities expected of all contracting party.
Such formal agreements are documented in accordance with legal standards, and all parties must adhere to its contents. However, there are instances where a contracting party has no intention of complying with contractual obligations. Once a party fails (or is unable) to comply with the terms of a contract, that party has breached the contract.
Such an occurrence is devastating and frustrating and could result in loss or damage to the affected party.
Due to the complicated nature of business contracts, businesses should take care when entering into binding agreements. Slight modifications to the wording of a contractual agreement could easily mean drastic changes in responsibility or liability.
As such, it's essential that individuals and organizations have a trusted legal counsel review all contract documents before presenting or signing them.
The four major types of breach of contract (according to their degrees of severity) are:
- Minor breach.
- Fundamental breach.
- Material breach.
- Anticipatory breach.
Also referred to as a partial breach, a minor breach allows the non-breaching party to only sue for actual damages, not for specific performances given. For instance, imagine a remodeling contractor uses a different tile brand than the one previously agreed on, though it acts and looks the same. The homeowner cannot claim a partial breach since the performance of the contract caused no actual damage.
In this instance, the breach of contract is more serious and allows the non-breaching party to sue for damages. In the example above, if the contractor used a different tile brand that was fragile and prone to cracking, the homeowner can seek compensation. This could involve restitution for the loss in value to the property or total overhaul/replacement.
Also called a repudiatory breach, a fundamental breach is more significant than a material breach. Such a breach allows the non-breaching party to sue for damages and end the initial contract. For instance, if the contractor uses a tile that soaks in moisture and allows mold to grow throughout the home, such an occurrence can be termed a fundamental breach since there is significant damage to property and health concerns.
This type of breach allows the non-breaching party to consider a broken contract situation as immediate and sue the guilty party before completion of the requested service. If the contractor refuses to take calls from the homeowner after the installed tiles have damaged the kitchen, the breach of contract can be considered to be immediate. Even if the contract requires the contractor to remodel the rest of the home, the homeowner can break the agreement due to the damage already done.
Only parties who are deemed eligible by law can sue a defaulting party for breach of contract. There are two types of parties that can sue for breach of contract: primary first parties and third parties.
- First-parties are the entities that are direct participants in the contract. For instance, a contract between two or more businesses for the supply of raw materials. Any of the businesses can sue the other(s) for breach of contract.
- Third parties are not direct participants to the contract, though they have a stake in its execution.
Before suing for breach of contract, the aggrieved party should ensure that a breach has actually occurred.
First, they must confirm the existence and enforceability of the contract. Although contracts do not need to be written to become official, they must obey certain rules before they can be enforced.
The aggrieved party must also check if they are within their legal limits. Depending on the type of contract and breach, there are time limits in which lawsuits can be filed. Once the timeframe expires, you can't sue for breach of contract.
Lastly, you must ensure that you upheld your end of the contract. If you failed to carry out your contractual obligations, causing the other party to also breach the contract, you can't sue them for damages.
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