Types of Breach of Contract

If a person or company fails to fulfill any term of a contract without a legitimate excuse, it may be considered a breach of contract. If this is the case, you need to understand the difference between an anticipatory breach, a fundamental breach, a material breach, and a minor breach.

In this article, you will discover the four types of breach of contract.

What is a Contract?

While a lot of people think they have to be formalized in writing, they can be spoken as well. Contracts are often used when offering employment, renting property, purchasing vehicles, or arranging for work to be done.

There are several elements that need to be in place for a contract to be considered legal and valid:

• One party must make an offer and the other party must accept it. This can happen by handshake in person, via phone call, or in writing. You may have something as formal as a multipage document or as simple as an email.
• The contract must clearly state what items of value will be exchanged. You may be accepting a product or service in exchange for money or you may be swapping products or services. Either way is fine, as long as the values are perceived to be relatively equal.
• The people entering into the contract must be at least 18 years of age to legally do so. Anyone with an illness or disability that would make it difficult for them to understand a contract has the right to cancel as well. You also should not enter into a contract while under the influence of alcohol or drugs.
• The contract must not be entered into because of pressure or duress. Involuntary contracts are not valid.
• Contracts are only legal if the services provided are legal. For example, you can’t sign a contract obligating someone to steal a car or make a drug deal.
• While not all contracts need to be in writing, those involving real estate, the repayment of debt, or any arrangement that will last longer than a year can be considered invalid if not put to paper.

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Types of Breach of Contract

Some contracts are made between two people while others involve multiple parties. There is a breach of contract in any instance where at least one person does not keep their end of the agreement.

Breaches of contract fall into several specific categories:

• A minor breach of contract occurs when the person who was injured by the breach attempts to collect damages. An example might be if a homeowner signed a contract for X-brand air conditioning unit and the contractor installed W-brand instead. There is not really any difference in the way they function. If the W-brand air conditioning unit cost less than the contract amount, the contractor might have to pay the difference between the two back to the homeowner.
• A material breach of contract is more serious. Let’s say that same W-brand air conditioner didn’t meet the specifications for the home’s wiring and a malfunction occurred, causing damage to the air conditioner and the home. The contractor would be responsible for paying for the replacement of the air conditioner as well as related repairs. In this case, the injured party has to prove what benefit he lost, the value of that lost benefit, and that the other party didn’t act in good faith to correct the mistake.
• Fundamental breaches of contract occur when the person suing wants to sue for damages while also terminating any uncompleted portions of the contract at the same time. This ensures the relationship is fully severed
• Anticipatory breaches happen when one party believes the other will not fulfill their end of the bargain. For example, a business may depend on a supplier to produce several parts of a product, yet the supplier appears to be behind schedule and/or refuses to provide progress reports. The non-breaching party can sue to break the contract and collect any damages incurred. This can include having to find another supplier at a higher cost, or costs associated with a penalty to someone else involved in the process.

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What are The Remedies?

Judges offer different types of remedies for broken contracts. Most are monetary and all involve terminating or ending the contracts in question.

There are two main types of compensation:

• Expectation damages usually apply when you have a clear idea of what you were supposed to receive and were not paid. For example, you were contracted at an hourly wage to teach a class and the educational institution did not pay you. A judge would review your employment contract to determine exactly what you are owed.
• Consequential damages are more complicated because they deal with indirect damages. For example, you are trying to open a gym and have collected membership agreements, but opening is delayed a week because your equipment doesn’t arrive on time. You have to push everyone’s contract start dates back a week and have lost that week of income.

United States courts do not award punitive damages for breaches of contract. That said, they may award this type of damage for other actions addressed in the same lawsuit.

How to Sue for Breach of Contract

Personal matters can often be settled quickly in civil court, especially if you have strong documentation proving you had an arrangement with another party. You will appear in court, present your case to the judge, and receive a judgement.

For more serious breaches of contract, whether personal or between businesses, you should consider hiring a lawyer familiar with contract law. This is especially important if you are attempting to collect damages from a larger business with a legal team, or if you simply have a more complicated contract to show in court.

You deserve to receive what is promised to you via contract and should never have to suffer financially due to someone else’s inability to come through. Call a lawyer as soon as you realize you have a problem. They may be able to help you settle without going to court, but will be prepared to take your case to the next level if it becomes necessary to do so.