So you entered into a contract but the other party hasn’t completed their obligations as agreed or maybe you agreed for the payment to be received on a specified date but the payment hasn’t been received, what should you do? A breach of contract occurs when either you or the other party to the contract breaks one or more of the terms. For example, you have entered into an employment agreement with your employer and your employer hasn’t paid you. The remedy for a breach of contract under English law is an award of damages, the second key remedy is specific performance.
Examples of Contract Breaches
Defective Performance:The contract is partly performed but not to the standard required by the contract.
Delayed Performance: The contract has not been performed on time in accordance with the timeframes provided in the contract.
Complete Non-performance: A party does not do anything to perform the contract.
Minor Breach: A minor breach of contract or an immaterial breach of a contract refers to situations where the end goal of the contract was ultimately reached but a party failed to fulfil some part of their obligations e.g. a late delivery, the receiving party will need to show the delay resulted in a financial loss in order to have a remedy.
Material Breach: A material breach of a contract is a complete failure to perform the contract. In other words it renders the contract irreparable. The breach has serious consequences and where the other party would not have entered into a contract if they could not have guaranteed the term that was breached.
For example, a builder has substituted an item agreed in the contract for an item that is less expensive and of lesser quality and will not last as long as the part specified in the contract.
Anticipatory Breach: Is where a party repudiates the contract before the performance of the contract is due, by indicating the party intends not to perform its obligations. The other party may then accept the repudiation and choose not to be bound by the contract.
Actual Breach: Where a party is unable to fulfil his or her contractual obligations by the deadline for the performance of the contract or during the course of performance.
Breach of Contract Claims
Before a party can consider remedies for a breach of contract, there needs to be a contract between the parties.
Contract disputes vary across industries and ultimately when assessing a contractual dispute, the parties must look at what the aim of the contract was, what duties and obligations each party had and the effects of the breach.
Pursuing a breach of contract is not as straightforward as it may seem, alongside proving the existence of a contract it must be proven the contract was breached and the breaching party did not fulfil their obligations as agreed in the contract. The innocent party must show that they suffered a loss and the loss suffered was a direct consequence of the breach of the contract.
It is important for the parties to consider whether it is worth pursuing a breach of contract through the courts. Legal proceedings can be time consuming and a distressing experience costing more than the loss suffered due to the breach of contract. In addition, it may damage the relationship between the parties and alternative methods of negotiation or dispute resolution may be worth considering before resorting to legal proceedings.
Remedies for Contract Breaches
The award of damages for a breach of contract is to compensate the innocent party for the loss suffered rather than to punish the breaching party. The idea is to place the innocent party into the same position he/she would have been in had the contract been performed without a breach. A simple way to work out the damages is to compare the position the innocent party is in because of the breach and the position the innocent party would have been in had the breach not occurred.
If damages do not fully compensate the party for the loss that has occurred, the innocent party may request the court to award specific performance, this requires the breaching party to perform his/her contractual duties.
Cancellation and Restitution
The innocent party may choose to terminate the contract and file for restitution if he/she has given any benefit to the breaching party.
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The opinions on this page are for general information purposes only and do not constitute legal advice on which you should rely.