Types of Breach of Contract and Legal Remedies

Key Takeaways

• There are several types of breach of contract, including minor, material, fundamental, actual, and anticipatory breaches.
• To pursue a claim, a valid contract must exist with clear offer, acceptance, and consideration.
• Remedies for a breach include compensatory damages, specific performance, and in some cases, punitive damages.
• Preventive measures like clear terms, detailed dispute resolution clauses, and regular reviews can reduce breach risks.
• Both parties should document performance, communicate changes, and seek legal counsel early if a breach seems likely.+

Types of Breach of Contract

A breach of contract is when terms of a contract are broken. It involves at least one of the parties in the agreement that who not keep his or her part of the deal. The following are different types of contract breaches:

• Minor or partial breach: when one party doesn't do what the contract states he or she is supposed to do. You may be able to sue him or her, but only for “actual damages.”
• Material breach: when one party doesn't do what it says on the contract, thus causing it to be destroyed and allowing that party to be liable for breach of contract damages. The following must be presented to see if a material breach has happened, according to the Restatement of Contracts:
  • How badly the injured party is affected by the breach
  • How much the injured party can be paid according to the contract's terms
  • How badly the other party broke the contract's terms
  • How likely the other party will be able to perform the failed terms depending on his or her circumstances
  • How the other party behaves in good faith and fair dealing standards.
• Fundamental breach: when one party can sue the other party for breaking the terms, and potentially end the contract.
• Actual breach: when one party doesn't do what the terms said he or she was going to do by the due date.
• Anticipatory breach: when one party stops fulfilling his or her part of the deal, which makes the other party believe the agreed upon details will remain incomplete. Some examples of this include payment rejection, failing to give an ordered product, or making it apparent one or more parties can't or won't fulfill their part of the deal. The breaching party can be sued and the contract can be terminated by the other party.

Both actual and anticipatory breaches can waste time and money.

Common Causes of Contract Breaches

Breaches of contract can arise from various causes, many of which are preventable with careful drafting and due diligence. Common reasons include:

• Ambiguity or poor drafting: Vague language or undefined terms may lead to differing interpretations.
• Failure to perform on time: Late delivery or missed deadlines often trigger a breach, especially in time-sensitive contracts.
• Non-performance: One party may simply not perform their contractual obligations.
• Financial incapacity: A party may lack the funds to perform, especially in agreements involving payments or investments.
• Misrepresentation or fraud: When one party provides false information to induce agreement, the resulting breach can also give rise to rescission or additional tort claims.

Breach of Contract Elements

You can claim a breach of contract if you have a valid contract in effect, either written or oral. Three elements can help determine if a valid contract exists:

• Offer: discussion and agreement that goods or services would be provided in exchange for something valuable. There must also be the intention to start a contract or agreement.
• Acceptance: agreement to said terms between parties, which can easily be proven through a written contract.
• Consideration: each party much have gotten something valuable from the other party to show a contract is being entered.

To win the lawsuit, you must show the other party's breaking of the terms caused great loss or damage to you. This includes money, opportunity, or time loss.

Assessing the Severity of a Breach

Not all breaches carry the same weight. Courts often assess whether a breach is “material,” which determines the severity and available remedies. Key factors used in this assessment include:

• The extent to which the non-breaching party is deprived of the benefit expected from the contract.
• Whether the breaching party can or will cure the breach.
• The good faith conduct of the breaching party.
• The impact of the breach on the overall purpose of the contract.

Types of Remedies for Broken Contracts

If you have experienced a breach of contract by another party, there are some ways to fix things. Compensatory damages are given to the non-breaching to cover losses. Two types of compensatory damages are available:

• Expectation damages may be able to cover what you were supposed to receive from the contract.
• Consequential damages usually cover indirect damage, such as failure to receive an oven for your bakery.

Equitable Remedies Beyond Damages

In addition to monetary compensation, courts may award equitable remedies, especially when damages are inadequate:

• Specific Performance: The court orders the breaching party to fulfill their contractual obligations, typically used in real estate or unique goods transactions.
• Rescission: Cancels the contract and returns both parties to their pre-contract positions.
• Reformation: Modifies the contract to reflect the true intent of the parties when a mutual mistake or misrepresentation has occurred.

These remedies are discretionary and often hinge on fairness, the clarity of contract terms, and the nature of the breach.

Filing a Breach of Contract Claim

You can send the other party a breach of contract letter, letting him or her know that you plan on suing if the issue is not resolved. This will wake up the other party and signal something needs to change to keep the agreement going. If a lawsuit is to be filed, you will need to provide a copy of the letter and any other corresponding documents to prove your case. You could file with small claims court, but if the contract includes high-value terms, it's best to talk to an attorney.

Steps to Minimize Breach Risk

Taking proactive steps can help businesses avoid or mitigate contract breaches:

• Clearly define terms and responsibilities in writing, including timelines and deliverables.
• Include dispute resolution clauses that specify mediation or arbitration procedures before litigation.
• Implement performance tracking and review protocols to ensure compliance throughout the contract term.
• Maintain open communication with counterparties and document all interactions.
• Review contracts regularly and seek legal input when modifying obligations.

Legal Terms and Issues

• Actual Damages - This is money that helps compensate any money or properties lost because of the breach of contract. The amount awarded to you is based on proven harm, injury, or loss.
• Punitive Damages - This is awarded to you if you have experienced injury along with the actual damages. It's usually given if the breaching party's actions were intentional.
• Specific Performance - This is when the court orders the breaching party to complete his or her part of the bargain.

Frequently Asked Questions

1. What is the most serious type of contract breach?
   A material breach is generally considered the most serious because it undermines the core of the agreement and allows the non-breaching party to terminate the contract and seek full damages.
2. Can a verbal contract be breached?
   Yes, verbal contracts can be breached if they meet the legal requirements for enforceability, such as offer, acceptance, and consideration. However, proving terms in court may be more challenging.
3. What should I do if I suspect a breach of contract?
   Begin by reviewing the contract’s terms, documenting any failures or issues, and notifying the other party in writing. Consult an attorney to determine whether legal action is appropriate.
4. Can you sue for anticipatory breach before the deadline?
   Yes, if it becomes clear that the other party will not perform their obligations, you can file a claim before the due date based on anticipatory breach.
5. Are punitive damages common in breach of contract cases?
   Punitive damages are rare and generally only awarded when the breach involves fraud, malice, or gross misconduct beyond the scope of the contract itself.

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