Breach of Contract

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What is Breach of Contract?- Definition

Breach of contract is a legal cause of action and a type of civil wrong, in which a binding agreement or bargained-for exchange is not honored by one or more of the parties to the contract by non-performance or interference with the other party’s performance. A breach occurs when a party to a contract fails to fulfill its obligation(s), whether partially or wholly, as described in the contract, or communicates an intent to fail the obligation or otherwise appears not to be able to perform its obligation under the contract. Where there is a breach of contract, the resulting damages will have to be paid by the party breaching the contract to the aggrieved party.

Understanding Breach of Contract

A contract case usually comes before a judge because one or both parties claim that the contract was breached. A breach of contract is a failure, without legal excuse, to perform any promise that forms all or part of the contract. This includes failure to perform in a manner that meets the standards of the industry or the requirements of any express warranty or implied warranty, including the implied warranty of merchantability.

When a party claims a breach of contract, the judge must answer to the following questions:

  1. Did a contract exist? 
  2. If so, what did the contract require of each of the parties?
  3. Was the contract modified at any point? 
  4. Did the claimed breach of contract occur?
  5. If so, was the breach material to the contract
  6. Does the breaching party have a legal defense to enforcement of the contract
  7. What damages were caused by the breach?

Key Takeaways

  • A breach of contract occurs when one party in a binding agreement fails to deliver according to the terms of the agreement.
  • A breach of contract can happen in both a written and an oral contract.
  • The parties involved in a breach of contract may resolve the issue among themselves, or in a court of law.
  • There are different types of contract breaches, including a minor or material breach and an actual or anticipatory breach.

Types of Contract Breaches

One may think of a contract breach as either minor or material. A "minor breach" happens when you don't receive an item or service by the due date. For example, you bring a suit to your tailor to be custom fit. The tailor promises (an oral contract) that they will deliver the adjusted garment in time for your important presentation, but in fact, they deliver it a day later.

A "material breach" is when you receive something that is different from what was stated in the agreement. Say, for example, that your firm contracts with a vendor to deliver 200 copies of a bound manual for an auto industry conference. But when the boxes arrive at the conference site, they contain gardening brochures instead.

Further, a breach of contract generally falls under one of two categories: an "actual breach"—when one party refuses to fully perform the terms of the contract—or an "anticipatory breach"—when a party states in advance that they will not be delivering on the terms of the contract.

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