Key Takeaways

  • A breach of contract occurs when a party fails to fulfill their contractual obligations, either fully or partially.
  • The main types of breach of contract include actual and anticipatory breaches, as well as minor, material, fundamental, and repudiatory breaches.
  • The severity of a breach — and the remedies available — depend on how significantly it affects the contract’s purpose or the non-breaching party’s interests.
  • Anticipatory breaches allow the injured party to act before the contract deadline, while material or fundamental breaches often justify termination and damages.
  • Understanding these categories helps parties better navigate legal remedies such as damages, specific performance, or contract rescission.

A breach of contract is when an individual or party fails to meet their objectives or fulfill their part of a binding agreement. Generally, a breach of contract falls into one of two categories:

  1. Actual breach: this occurs when one party does not meet their responsibility as determined by the contract, by the agreed upon expected date of completion. This also includes instances in which the job is only partially completed, per the parameters of the contract. Unlike with an anticipatory breach, the non-breaching party cannot take legal action until the agreed upon date of completion has passed.
  2. Anticipatory breach: this is when an individual or party makes the other party (or parties) involved know, in advance, that they will not complete the job for which they were contracted, by the due date. This allows for the non-breaching party to void the contract and potentially sue the breaching party for damages or breach of contract in advance of the previously anticipated due date. Additionally, the non-breaching party can sometimes assume an anticipatory breach, provided they have adequate evidence that the job will not be completed in time.

Either type of breach potentially allows for the non-breaching party to take legal action against the other, and may result in loss of income, resources and time for all parties.

Minor vs. Material

Within the scope of a breach of contract, it may additionally be either minor or material:

  1. A material breach of contract occurs when the breaching party does not complete the entire job assigned or fails to follow through on a large component. An example of a material breach could be if you are hired to build a house and you only lay the foundation and nothing else. Within the scope of a material breach of contract is a total breach which occurs when the breaching party fails to complete any part of the job.
  2. A minor breach of contract (also sometimes called a non-material breach) exists when the breaching party follows through on more major components of the job and only fails to complete a lesser part of the agreement. For example, if you are contracted to draft a grant proposal for a nonprofit organization and you complete everything except for the budget narrative. Chances are, the organization will be able to complete that part, themselves and the project will be completed, however, the breaching party is still responsible for breach of contract.

It can sometimes be difficult to determine what is a material breach versus what is a minor breach. After all, the breaching party may claim they were unable to complete only a small part of the job, whereas the non-breaching party may claim otherwise. To determine if the breach of contract is material, some of the following things must exist:

  1. The degree to which the non-breaching party will suffer as a result of the breaching parties inability to complete the job. For example, if a grant writer does not complete the grant proposal by the due date, will the organization be able to find someone else to complete it in time to submit it to the potential funder? If not, how much money will the organization be losing?
  2. Whether or not the non-breaching party can be sufficiently “made whole” after the breach of contract. For example, perhaps the grant writer did not complete the proposal, but identified another potential funder with the same funding priorities and giving capacity, to whom a proposal can be submitted. In the absence of such an example, a nonprofit organization could be out a good deal of money.
  3. How much of the job did the breaching party complete? If a contractor completed the entire building of your new house, minus the hanging of the shutters, a judge probably would not consider this a material breach. However, if the contractor only completed the first floor of a two-story home, then that could be seen as a material breach of contract.
  4. Did the breaching party experience some kind of unforeseen life event? For example, did their parent pass away, forcing them to go out of town for an extended period of time to take care of family business? While the professional thing to do is to inform the non-breaching party of such events, this is something a judge may consider.

Fundamental Breach

A fundamental breach occurs when the breach is so severe that it strikes at the very heart of the contract, making its core purpose unattainable. Unlike a minor breach — which may involve smaller issues — or even some material breaches, a fundamental breach typically renders the agreement voidable and entitles the non-breaching party to terminate the contract immediately and seek damages.

For example, if a software company is contracted to deliver a secure payment processing system but instead provides a non-functioning prototype that exposes user data, this would likely be a fundamental breach. The failure goes beyond incomplete performance — it defeats the main purpose of the contract itself.

Courts usually assess whether:

  • The breach deprived the non-breaching party of substantially all expected benefits.
  • The contract’s main objectives can still be achieved despite the breach.
  • Damages alone would be insufficient to compensate for the harm.

Repudiatory Breach

A repudiatory breach occurs when one party shows — either through words or actions — that they no longer intend to be bound by the contract. This type of breach is considered especially serious because it indicates a total refusal to perform, even before the performance is due. Repudiation can occur explicitly (e.g., a supplier notifies a buyer they will not deliver goods) or implicitly (e.g., taking actions that make performance impossible).

The non-breaching party is then entitled to:

  • Treat the contract as terminated and stop their own performance.
  • Seek damages for any losses caused by the repudiation.

It’s important to note that repudiatory breaches can overlap with anticipatory breaches, but the distinction is that repudiation often involves complete abandonment of contractual obligations, while anticipatory breaches might still involve partial performance or negotiation.

Consequences and Remedies for Different Types of Breach

The remedies available after a breach largely depend on the type and severity of the breach. Courts aim to restore the non-breaching party to the position they would have been in had the contract been fulfilled. Common legal remedies include:

  • Compensatory Damages: The most common remedy, intended to cover direct losses resulting from the breach.
  • Consequential Damages: Awarded for indirect losses, such as lost profits, if they were foreseeable at the time of contracting.
  • Specific Performance: A court order requiring the breaching party to fulfill their obligations — often used in unique contracts (e.g., real estate).
  • Rescission: Termination of the contract, freeing both parties from further obligations.
  • Restitution: Returning any benefits conferred before the breach.

For minor breaches, damages may be limited, while fundamental or repudiatory breaches often justify termination and broader compensation claims.

Frequently Asked Questions

  1. What are the main types of breach of contract?
    The main types include actual, anticipatory, minor, material, fundamental, and repudiatory breaches, each differing in severity and legal consequences.
  2. How do I know if a breach is material or fundamental?
    A breach is material if it significantly impacts the contract, while it is fundamental if it defeats the core purpose of the agreement altogether.
  3. Can I terminate a contract for a minor breach?
    Usually, no. Minor breaches typically allow for damages but do not justify termination unless the contract explicitly provides otherwise.
  4. What should I do if the other party repudiates the contract?
    You can treat the contract as terminated immediately and seek damages for any resulting losses. Legal counsel can help ensure you take the correct steps.
  5. Are damages always available after a breach of contract?
    Not always. The availability and amount of damages depend on the type of breach, the extent of harm, and whether the losses were foreseeable when the contract was formed.

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