For any transaction to happen, professionals always have it written and signed for it to be substantial and concrete. This written agreement is called a contract.
In the legal world, two parties enter a contract on mutual grounds and sign it, making sure that all terms and conditions are met. When they sign it, they have to follow all requirements mentioned in the contract. The contract now becomes a two way street: both of them have to abide by the rules and comply with the conditions for it to really work.
However, situations happen and intentionally or unintentionally, contracts are not fulfilled by either party. This is called a breach of contract in lawsuits. But the story doesn’t end here, let’s dive into details.
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Breach of Contract Definition
When one party violates a contract that shapes a business or legal relationship, it is known as a breach of contract. This breach isn’t considered as a normal or routine thing that happens; it is serious and gets you into legal trouble.
The breach in contract can either be full or partial; it isn’t necessary that if the contract is breached in full or some of it, a breach is a violation that is punishable. Of course, the extent of the measure and impact depends on the level of violation.
When one party breaches the contract, it directly affects the other party who may suffer financial losses or other problems. When the situation is brought to court, the victim will be compensated either in monetary terms or some other to help with the loss.
For a contract to actually be considered a breach, there are certain requirements:
- The contract shall exist and be active between the two parties
- Valid contract
- The plaintiff must show that the defendant breached the contract
- The plaintiff must have done their part of the contract
- The plaintiff must inform the defendant about the breach before filing a lawsuit- a written notification is obviously better than informing them over the phone verbally.
Types of Breach of Contract
A breach of contract doesn’t necessarily have to mean disobeying or not complying with the contract completely, there are four essential ways of how a contract can be breached.
There are four types of breach of contract:
Minor breach of contract: This is when a minor part of the contract is violated by one party and in turn affects the other one. This could be an error in dates or a typo or a minor action which affects the contract overall.
Material breach of contract: This is when the other person has suffered significantly as a result of the breach. When this type of breach is brought to the court, the damages are paid by the party who has violated the contract to compensate the victim.
Fundamental breach of contract: If the other party has breached the contract, you are well within your rights to sue them or even end the contract if you wish.
Anticipatory breach of contract: If you suspect that the other party will not be able to hold their end of the contract, so you prevent yourself from the damages that are likely to occur. In such a case, the compensation is always monetary and in some instances, a judge can award an injunction or specific performance when monetary compensation for a breach of contract does not settle the breach effectively.
Breach of Contract Examples
A breach of contract can be any that affects the other person and the overall agreement that was done in the first place for example:
- Failure to provide services
- Misrepresentations of assets being used as collateral
- Failure to abide by the rules of the court order- contempt of court
- Missing a payment on the due date
- Contract was based on fraud
- Illegal contract
There can be numerous examples of how a contract is breached, but it naturally falls in the categories and examples mentioned above.
Breach of Contract Cases
Here is a list of some of the cases of breach of contract and how they were solved.
Condor v Baron Knights (1966)
A 16 year old entered a contract with the Band, Baron Knights to play the drum seven nights a week for five years. The boy suffered a mental breakdown and was advised by his doctor not to play the drum for more than four nights. The band sued the boy for breach of contract, but then he brought the case to court for wrongful dismissal. The contract was terminated in the end because the claimant couldn’t perform in the band anymore because of his mental condition.
Bolton v Mahadeva (1972)
The claimant agreed to decorate and furnish the defendant’s flat for £750 payable by two instalments and the balance on completion. The claimant completed the work but the defendant was unsatisfied with some of the furnishings and refused to pay the all the final instalment. The cost of the defects in the furniture came to £56. According to the final verdict of the case, the claimant had substantially performed the contract and was therefore entitled to the contractually agreed price minus the cost of the defects.
Planche v Colburn (1831)
The claimant agreed to write a book on costume and armour for the defendant as part of a series called ‘The Juvenile Library’. The agreed contract price was £100 to be payable on completion. The claimant commenced writing and had completed a great deal of it when the defendant cancelled the series. The defendant refused to pay the claimant despite his undertaking and the fact that the claimant was still willing to complete. The claimant brought an action to enforce payment. The claimant was entitled to recover £50 because the defendant had prevented the performance.
Consequences of Breach of Contract
If one party breaches the contract, there are certain rights given to the other party to make a decision as per their convenience:
- They can terminate the contract and cancel all future dealings with them
- Claim for damages the breach has caused them
- The violating party gets an impression stuck with them which may make it difficult for them for future contracts with other parties
A contract is a written agreement of two parties who have found mutual ground for dealing, and if any one party violates the full contract or some part of it, it is known as a breach of contract. Breach of contract has several consequences especially if the other party sues you for this and brings the case to court. It is always best to make sure that the contract is being followed properly and if in case the other party suffers damages, you compensate them out of court before things start to get messy.