The phrase breach of contract is a broad brush term used in contractual law.
Whilst most people will understand what it means in practice, few will have the specialist knowledge to appreciate either what constitutes a breach in the eyes of the law or whether such breaches can be fatal. That’s why the services of contract law specialists like Harold Stock & Co Solicitors are vital. However, to make this area of law a little clearer, we’ve produced this brief guide about breaches of contract which we hope you will find useful.
What is a breach of contract, and what are the most common breaches?
A breach of contract essentially means that one or more of the terms and conditions laid out in a contract has been broken. Breaching a contract may lead to the contract breaking down completely and can easily lead to legal action and claims for damages in a law court. Most contracts are formed when an agreement is made between two or more parties to carry out a service in return for payment for that service.
If one of the parties fails to carry out their side of the agreement, then that party can be said to be in breach of contract. Breach of contract can also occur if any work carried out is defective, or if one party makes the other aware that they will not be carrying out the agreed work. Breaches of contract can also include non-payment for a service or not paying on time, failure to deliver services or goods, and being late with services without a reasonable excuse. Terms and conditions are a fundamental part of a legally binding contract and any broken terms can lead to breach of contract.
Types of Breach of Contract
The main types of breach of contract will be minor, material, fundamental, and anticipatory:
Minor breaches could, for example, be a builder who substitutes his own type of materials for specified materials. The substituted materials may work just as well as those specified, but technically this can still be construed to be a minor breach of contract.
A material breach will generally be a breach that will have serious consequences on the outcome of the contract.
A fundamental breach would be one so serious that the contract has to be terminated.
An anticipatory breach is one where one of the parties makes it known that they will not be carrying out all of the agreed work, and the consequences can be termination of the contract and damages being sought in court.
Damages for breach of contract
Damages can be awarded to an innocent party if a law court upholds that a contract has been breached. Damages will be used to compensate the innocent party for their loss caused by the breach. These damages are usually a remuneration that will reflect the loss. For example, if an employer dismisses an employee unfairly, then the employee could claim damages for loss of earnings under breach of contract. Damages can even be awarded when there has been no actual loss, though the innocent party will generally only be awarded nominal damages.
Proof of breach
If a dispute does occur due to breach of contract then the judge will need to decide that a legally binding contract exists, and that it has been breached. In some cases the contract may only be a verbal contract and there may be no actual written evidence that a contract was formed. However, in such cases a judge will need to study the terms and conditions of the contract in detail, and then clarify what actually was agreed in practice.
Damages due to Breach of Contract
An entitlement to damages may be awarded if the innocent party can prove that a breach of contract took place. The innocent party must firstly prove that there was a loss due to the breach, and then prove that the nature of the loss would lead to compensation. Remoteness of loss will also be taken into consideration by the courts and may include future loss that could reasonably occur from the contract being broken.
Other losses can include loss of profits, the cost of rectifying the breach and wasted expenditure. If disputes do end up in the law courts then the amount awarded may depend on how much documented proof the claimant has regarding financial loss. This can include actual records and document proof of financial loss due to the breach. However, if there is little proof, damages can still be awarded: the judge will ascertain all of the facts of the case from the evidence presented.
Breaching a contract can be a serious offence and is one of the most common offences to come before the courts. Anyone considering court action for breach of contract should seek expert legal advice before proceeding. Court disputes are a lengthy and costly procedure and the legal costs should be weighed up against the likely damages awarded.
For more information about breaches of contract or contract disputes and resolution, call Harold Stock & Coon 01457 835597 or email email@example.com.