Promises can be broken. You may have hired a contractor to complete a project within a specific timeframe and according to local standards, only to find the work incomplete or unsatisfactory. If you’re a supplier, you might have delivered a bulk order of goods to a client, but they failed to pay as promised. In these instances, it is important to identify the types of breaches of contract and understand the legal remedies at your disposal.
How Many Types of Breach of Contract Are There?
There are two primary types of breach of contract: material breach and minor breach. Each type carries distinct implications and consequences that determine the legal remedies available to the affected parties.
Material Breach
A material breach occurs when a party fails to perform a substantial and essential part of the contract. This type of breach is considered significant and goes to the heart of the agreement. When a material breach happens, the non-breaching party is typically deprived of the expected benefits outlined in the contract. In such cases, the non-breaching party may be entitled to legal remedies and damages. Here is an example of a material breach:
Party A enters into a contract with Party B to build a custom-designed website for Party B’s business. The contract specifies that the website must be finished within 60 days. However, Party A fails to complete and finish the website even after several months of delay, rendering it useless for Party B’s marketing needs. This substantial delay and failure to fulfill the primary purpose of the contract constitute a material breach.
A material breach can result in the non-breaching party’s right to terminate the contract and pursue compensation for losses incurred.
Minor Breach
In contrast to a material breach, a minor breach involves the partial or incomplete performance of a non-essential aspect of the contract. While the breaching party fails to meet certain obligations, the core purpose of the contract remains intact. Although the impact of a minor breach may be less severe, it is still essential to address such breaches promptly to prevent further complications. Here is an example of a minor breach:
Suppose Party A contracts with Party B to supply 100 widgets by a specified date. The contract states that the widgets should be of a specific color, but Party A delivers widgets that are slightly different in shade. Although Party B may have preferred the exact color as per the contract, this deviation does not significantly impair the functionality or value of the widgets, making it a minor breach.
Note that the assessment of whether a breach is minor or material depends on various factors, including the specific terms of the contract, the impact on the parties involved, and the overall context of the business relationship. In case of a minor breach, the non-breaching party may seek damages to recover losses caused by the breach. However, termination of the contract is generally not a remedy unless specified otherwise in the contract or under specific circumstances defined by applicable law.
Breach of Contract: Types of Damages
Various types of damages can be awarded depending on the specific circumstances of a breach of contract. It is crucial to understand the different categories of damages available in such cases. The following are the primary types of damages for breach of contract:
- Compensatory Damages: These damages aim to compensate the non-breaching party for the actual financial losses suffered due to the breach. Its purpose is to, as much as possible, revert the injured party to the position they previously been if the breach did not happen.
- Consequential Damages: Also known as special damages, cover indirect losses that arise as a consequence of the breach. To recover consequential damages, it is necessary to demonstrate that such damages were reasonably foreseeable at the time of contracting.
- Punitive Damages: In rare situations involving egregious behavior, punitive damages may be awarded. However, punitive damages are generally not common in breach of contract cases and are more commonly associated with tort actions.
Consult an attorney to understand the specific laws governing damages for breach of contract and the particular circumstances of your case. For more information on legal procedure, visit Federal Rules of Civil Procedure at www.uscourts.gov.
Prevention is Key
Preventing a breach of contract is always better than resolving disputes in court. Here are some practical steps to help promote contractual compliance:
- Careful Contract Drafting: Ensure that the contract is drafted clearly, with all essential terms, obligations, and conditions accurately outlined. Seek the assistance of a qualified lawyer to review and draft the contract to minimize ambiguities.
- Thorough Due Diligence: Conduct a thorough review and due diligence process before entering into any contractual agreement. Identify any red flags or potential issues that may arise during the performance of the contract.
- Effective Communication: Maintain open and transparent communication with the other party throughout the contract’s duration. Clearly express expectations, address concerns promptly, and negotiate any necessary modifications or amendments.
- Record-Keeping: Maintain detailed records of all communication, changes, and updates related to the contract. These records can serve as valuable evidence in case of a dispute and help establish the intentions of the parties involved.
- Regular Performance Monitoring: Continuously monitor the performance of both parties to ensure compliance with the contract’s terms. Address any deviations or potential breaches promptly to mitigate risks and find amicable resolutions.
Always have a lawyer draft your contract. By seeking legal assistance from the outset, you not only ensure that the terms of your contract resonates your true intentions but also equip yourself with an effective recourse in the event of a breach. Remember, professional legal guidance at the drafting stage establishes a solid foundation for your contract to survive when promises are broken.
Read about The Importance Of A Well-Drafted Contract To Avoid Business Litigation
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