Kinds of Breach of Contract: What You Need to Know
A breach of contract is when an individual or party fails to meet their objectives or fulfill their part of a binding agreement.3 min read
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:
- 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.
- 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:
- 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.
- 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:
- 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?
- 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.
- 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.
- 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.
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