Key Takeaways:

  • A party may claim remedies for contract non-performance, including damages, specific performance, or contract termination.
  • Courts categorize breaches to decide appropriate remedies, often applying the "substantial performance" doctrine.
  • Termination is an option if the breach affects the contract's core, but cancellation is usually a last resort.
  • Small businesses may find non-litigation solutions, often avoiding contract cancellation or court.
  • Detailed documentation of obligations and breaches can support claims effectively.

There are many remedies for non-performance of contract that a party can utilize in the event the obligations of a contract have not been met. When a contract is drafted, both parties are agreeing to perform what the contract specifies unless:

  • The parties agree to change the terms of the contract
  • The action of the party who has deviated from the contract is accepted implicitly either by an action or inaction of the other party

If the deviation from the original term of the contract has not been accepted and is deemed to be serious enough to have altered the intended result of the contract, the party who deviated could be held responsible for breaching the contract.

While a party who does not perform their obligations is considered a breach, a party interfering or preventing a party from completing their contract duties could also be held in breach of contract. While these types of breaches for non-performance are fairly straightforward, the situation can become more complex in the event there is an argument over things such as:

  • The quality of materials
  • The timing of the work

When a breach of contract occurs, the non-performing party can be subject to a claim for damages by the other party in the contract. If a contract has been breached by one party, the non-breaching party will no longer be bound by the obligations outlined in the contract.

To be successful at claiming damages, the non-breaching party will be able to support their claims for a breach if they made sure to perform all of the obligations required of them by the contract up until the breach by the other party occurred. They also must have been sure not to do anything that could be considered interfering with the contract or making it unreasonable for the other party to have accomplished.

When a claim does occur, the non-performing party will most likely try to find excuses for their conduct, so it is important to have a record of the aggrieved party's adherence to the contract and their obligations laid out in it.

Breach of Contract in Court

Since the performance of a contract can be difficult to categorize, courts have begun to see these cases in terms of "breached" and " not breached" to be able to make a fair judgment. The doctrine of "substantial performance" can also prevent a party that has mostly fulfilled their obligations stated in the contract from suffering a major loss in a claim due to falling short in an area of the contract that did not affect the overall essence of the contract or its intention.

The court may limit cases to those where a true breach has occurred, causing the contract to not be fulfilled, because the court would otherwise be swamped with cases if every customer filed a claim for damages for dissatisfaction or imperfections in services. If the party fell short of perfection but substantially performed the duties underlined in the contract, they have the right to sue for payment.

Though it is possible for the dissatisfied party to win an adjustment to the payment, if the party fails to perform the contract fully and affects the essence of the contract, they cannot sue for payment even if the failure was unintentional.

Types of Breaches and Their Legal Implications

In contract law, breaches are categorized based on severity and impact, which informs the remedies available to the non-breaching party. The primary types of breaches include:

  • Material Breach: A significant breach that undermines the core intent of the contract, allowing the non-breaching party to terminate the contract and sue for damages.
  • Minor (Non-Material) Breach: A less severe breach where the contract's main purpose is still achievable. In such cases, the non-breaching party may seek compensation but typically cannot terminate the contract.
  • Anticipatory Breach: When one party indicates they will not fulfill their contractual obligations before the due date, the other party may terminate the contract immediately and seek damages.
  • Actual Breach: This occurs when a party fails to perform a duty by the agreed time. The non-breaching party can seek specific performance or damages, depending on the breach's impact​.

Understanding the type of breach is essential to determining the correct remedy, as courts consider this in their judgment of appropriate compensations and other remedies.

The Right to Terminate a Contract for Non-Performance

A party has the right to terminate a contract for non-performance and sue for damages as long as the non-performance affects the core of the contract agreement. Even though parties are expected to fulfill all of the terms of the contract, non-performance does not always constitute a violation of a contract.

Under contract law, small businesses and other parties are only afforded the right to void a contract as a last resort measure. Additionally, small businesses can often remedy the non-performance of a contract without having to cancel the contract or take their case to court.

Remedies Available for Non-Performance of Contract

When faced with a non-performance or breach of contract, the non-breaching party has several remedies:

  1. Damages: The most common remedy, damages compensate for losses resulting from the breach. They are categorized as:
    • Compensatory Damages: Directly cover the loss caused by the breach, restoring the non-breaching party to their expected position if the contract were fulfilled.
    • Consequential Damages: Cover indirect losses resulting from the breach, such as lost profits.
    • Liquidated Damages: Pre-determined damages agreed upon within the contract, applicable if the breach occurs.
  2. Specific Performance: This court-ordered remedy requires the breaching party to fulfill their contractual obligations. Specific performance is typically used when monetary damages are insufficient, such as in contracts involving unique goods or property.
  3. Rescission: If both parties agree, they may rescind the contract, effectively canceling it and releasing both parties from further obligations.
  4. Reformation: This allows courts to modify contract terms if errors or miscommunications are present, adjusting the contract to reflect the original intent of the parties​.

Selecting the appropriate remedy often depends on the breach's severity and the nature of the contract, emphasizing the importance of clear terms and conditions within any contract.

Frequently Asked Questions

  1. What are the main remedies for non-performance of a contract?
    Remedies include damages, specific performance, contract rescission, and reformation, each suited to different situations based on the breach's nature.
  2. Can a party terminate a contract for any breach?
    No, termination is generally reserved for material breaches that affect the core purpose of the contract. Minor breaches may only allow for damage claims.
  3. What is the “substantial performance” doctrine?
    Substantial performance means a party has mostly fulfilled their obligations, allowing them to sue for payment despite minor imperfections, provided these do not alter the contract’s essence.
  4. How do courts handle anticipatory breaches?
    Courts allow the non-breaching party to terminate the contract and seek damages immediately upon a clear indication that the other party will not fulfill their obligations.
  5. Can non-performance be resolved without going to court?
    Yes, many cases are resolved through negotiation, contract reformation, or other out-of-court solutions, especially when both parties wish to avoid litigation.

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