How is a Breach of Contract Defined?
A breach of contract occurs when one party to a contract fails to follow through with their obligations as set out in the contract. A breach of contract can occur even if the failure to perform obligations is unintentional. For a breach of contract lawsuit to be valid, there must be an agreement between two parties where one of the parties has failed to fulfill their responsibilities to the other party.
For a breach of contract to be valid, the following elements must be present:
Types of Breaches
While all breaches of contract can have serious trials, some might be more consequential than others. For this reason, it is essential to understand what could be perceived as a minor breach versus a well-established breach of contract.
Minor Breach
If only part of the contract has been breached or if the breach was proven to be unfounded, then a minor breach has existed . At the same time, a minor breach of the contract usually requires the obligation to be fulfilled and the other party may be permitted to recover any damages that they produced.
Major Breach
The contract has been violated so significantly that it would clearly explain that the other party would never have entered into the agreement in the first place. In this case, a major breach of the contract means that the other party is totally relieved from their obligation to the offending party and they could seek damages to compensate for the breach.
Anticipatory Breach
The anticipatory breach of a contract occurs when a party indicates an unwillingness to meet their obligations before the contract is due. This type of breach is also called a repudiatory breach. Either by a verbal statement or a written notice, a repudiatory breach assures that the other party would not fulfill their obligations under the contract.
Reasons for Breach of Contract
Many times, when a breach has occurred, it is either clear (or at least most people think it is clear) what the cause of the breach was. The parties to the contract might agree that an accurate assessment of the situation is that one of the parties suffered an injury because the other party did not perform in accordance with the agreement they made.
However, when a breach occurs, there may actually be a number of different situations that developed into a breach. For instance, some of the reasons for a breach may include:
- Non-Performance. The most obvious reason that a contract may be breached is that one of the parties simply did not perform in accordance with the agreement that they made. For instance, in Jones v. J.D. McMullen, Co., Inc., 28 Mass. App. Ct. 721, 723 (1980), a contractor failed to build according to the contract, and the homeowner sued him for damages.
- Delayed Performance. In Harris v. Cambridge Credit Counseling Corp., 454 F. Supp. 2d 69, 73-74 (D. Mass., 2006), the plaintiff entered into an agreement with a credit counselor to try to obtain a mortgage modification and halt foreclosure proceedings on his home mortgage. However, when the plaintiff later found out that his foreclosure was moving forward, he became aware that the defendant had not performed in a timely manner.
- Incorrect Performance. In Culinary Foods, Inc. v. Raychem Corp., 300 F.Supp.2d 1068, 1072 (D.Kan.,2003), the Court addressed the incorrect performance of a contract where the product manufactured by the defendant did not meet the guidelines or specifications set forth by the agreement.
In the event that you find yourself in a situation with a breach of contract situation involving any of the above scenarios, it is best that you contact us for further information and assistance.
Remedies for Breach of Contract
When a party brings a breach of contract lawsuit, there are several legal remedies, or potential outcomes depending on the specific facts of the case, including:
Damages
In the usual case, remedies for breach of contract include money damages or equitable relief, such as specific performance or rescission. Damages may be "consequential," that is, those damages that arise as a foreseeable consequence of the breach, but only if they fulfill two requirements: 1) the breaching party must have been aware of the circumstances of the contract; and 2) the breach was not a normal incident of the behavior in question.
Specific Performance
Specific performance is an equitable remedy that may be employed when money damages cannot appropriately make the injured party whole, and the subject of the contract is unique and irreplaceable.
Rescission
Rescission is an equitable remedy applicable in situations where the legislature has granted the injured party a specific right to relief, such as in the case of sales by minors through restrictive statutes, or for fraud.
Restitution
The remedy of restitution applies in cases where one party has been unjustly enriched at the expense of another, and would be the equivalent to the imposition of a constructive trust.
Filing a Breach of Contract Suit
Once you or your attorney has evaluated the contract and determined that a breach has occurred, the next step is to file a complaint in court. This is usually started by preparing a form of complaint (that may have to be later filed electronically) and filing this with the respective court. The complaint paints a picture for the Judge or Court concerning why a trial is necessary to remedy the alleged wrong done to the Plaintiff. Simply stated, a complaint must inform the Judge or Court what harm you have suffered and why relief is warranted. Once the complaint is filed it is then "served" upon the other party. This creates "jurisdiction" over the other party (in order to legally force them to appear in court).
Breach of Contract Defenses
The idea that a defendant can come up with excuses for failing to live up to their obligations under a contract provides much of the basis for defenses in breach of contract lawsuits, which defendants will assert in an attempt to defeat a plaintiff’s claims or reduce the amount of damages owed.
One of the more commonly known defenses for breach of contract is known as impossibility of performance, which simply stated means that the defendant cannot be reasonably expected to fulfill their contractual obligations due to the occurrence of an unforeseeable event (such as a natural disaster) or since it has become impractical for them to satisfy their end of the agreement at this time. If the unexpected event exists and one party to the contract does not exert reasonable effort to mitigate their damages in response, they may be able to assert this as a defense to liability.
Fraud is also sometimes a defense for breach of contract when the party invoking the argument can prove that there was misrepresentation, concealment or nondisclosure of material facts that served to induce a party to accept the terms of the contract . Concealment or nondisclosure often occurs when one party to the contract knows that the other was unaware of key facts and remained silent and proceeded as if the facts are not important to the other.
Duress is defined as the application of unlawful pressure to induce someone to perform an act against their will. Duress can be both physical (such as a person being subjected to actual physical force to get them to accept to a contract) or economic (in which one party may make threats to harm the business of another if they do not agree to a certain contract provision). A defendant may have to provide some evidence that such pressure was applied; if they do so, it’s then up to the burden to prove that they agreed to contract under duress.
Mistake can be used as a defense if the actual contract does not reflect what each of the parties originally agreed to. This occurs when one party finds out that the contract contains an error it would not have proceeded if it had full knowledge of the mistake.
Timing of Breach of Contract Lawsuits
In almost all legal cases, there is a time limit or Statute of Limitations, as it is called, within which a lawsuit must be filed in order for the injured party to pursue their claim. This is also true in breach of contract cases. In most states this initial time limit is 2-3 years. After the expiration of this time limit it will result in the loss of the right to sue and to recover damages. The starting point for when the time limits run is usually the date of the breach or some other similar date. There are exceptions to these time limits and if you have a potential claim, you should consult with an attorney immediately to determine whether you meet the time limits and to determine your rights and if they can be pursued. The time limits vary by state.
How to Avoid a Breach of Contract
When entering into a contract, it is always a good idea to have clear terms in place and to make sure that both parties know their duties and responsibilities. By doing so, you will be able to prevent a large number of contract breaches. Here are some tips for preventing contract breaches: Make the agreement in writing. The best way to prevent a breach of contract claim is to make sure that everything is written down. It does not matter if it is long and complicated or short and simple; all of the terms should appear in the written document. Make the terms specific. Not only should all of the terms be written down, but they should also be specific. Providing as much detail as possible is important. The more general that the terms of the contract are , the greater the chance that someone will argue about how the terms are supposed to be applied. Communicate with the other party. Even once an agreement has been put on paper, it is important to keep an open line of communication with the other party. If there are any questions about the terms of the contract or deadlines that need to be met, speak with the other party as soon as possible. Ask for legal advice. Even with the most carefully drafted contract, disputes can arise. To give yourself the best chance of preventing a breach of contract lawsuit, seek legal counsel before entering into any legally binding agreement.