What Is a Breach of Contract?

The Law Offices of Jacob Emrani is known for winning clients millions of dollars of damages in personal injury and medical malpractice cases, but breach of contract is a term most people aren’t familiar with. In a contract case, one or both parties may claim the contract was breached. This means one or more entities failed to perform per the terms of the contract, in a manner that meets industry standards, or such that the requirements of an express or implied warranty are satisfied.

How to Determine a Breach of Contract Occured

Breaching a contract is not as difficult as it may seem. Accidental breaches occur, especially with more complex contracts. Missing a deadline, delivering the wrong product, or submitting the wrong payment amount can constitute a breach. Other ways a breach of contract can occur include:

• Non-Performance: One party simply fails to fulfill the obligations it promised in the contract.
• Partial Performance: The obligations required of a contract are partially fulfilled when the terms explicitly call for complete fulfillment.
• Delayed Performance: Unless the contract provides for some flexibility, a party can breach it if they perform but after an agreed-upon deadline.
• Impossibility of Performance: A party unable to fulfill its obligations may breach a contract, even in circumstances like changes in government regulations, a natural disaster, or the death of a key person involved in the contract.
• Misrepresentation/Fraud: If false statements are made or information is concealed during negotiations, and one party relies on these misrepresentations (causing detriment), it can be considered a breach of contract.
• Changes In External Factors: A change in market or economic conditions or regulatory requirements, if they affect contract performance, can lead to a breach.
• Lack of Resources: A breach can occur if a party lacks the resources needed to perform per the agreement. For example, limited production capacity can prevent a supplier from delivering the agreed-upon quantity of goods. 

A contract may also be misinterpreted. A party may not comply with the requirements because they have a different understanding of their obligations. The terms should be drafted and reviewed carefully to avoid these misunderstandings. A party can also consider risks, contingencies, and methods of dispute resolution before signing a contract. Effective communication can also reduce the risk of a breach.

Types of Breaches

The courts generally look at five common types of breaches of contract. These types of breaches and the circumstances surrounding them include:

• Minor Breach: One party delivers goods and services but not on time, which is critical if the contract specifies a delivery time or stays something like “time is of the essence”. The breaching party may be required to pay back damages caused by the delay.
• Material Breach: One party violates a significant term by, for example, delivering a completely different product than was ordered. It may have completely ignored the contract and what was originally agreed upon.
• Anticipatory Breach: One party has advance knowledge they cannot fulfill their contractual obligations. It must pay for damages caused by the breach, while the other party does not need to take any further actions under the contract.
• Actual Breach: One party has completely failed to meet the terms of the agreement. In this case, the other party can use the remedy provided by the contract, agree to a new contract, or choose arbitration or mediation. It can cut its losses or sue for damages in court.
• Mutual Breach: Both parties breach the contract if, for example, the circumstances change or changes in underlying markets make it impossible to fulfill contractual obligations. Options include voiding the old contract or creating a new one, making a contract breach the most desirable path. 

Proving a Breach of Contract Occured

There are lots of reasons for a breach of contract to occur. They include the difficulty of keeping track of contracts and how each department in a company handles contracts. If there are many types of contracts to manage, a lack of organization can violate agreed-upon terms and deadlines. But to prove there was a breach, a judge must determine:

• A properly drafted and signed contract existed.
• The contract clearly laid out each party’s requirements.
• Whether the contract had been modified.
• If the breach of contract occurred.
• The breach was material to the contract.
• Whether the breaching party has a legal defense.
• The damages that the breach caused.

In the case of a material breach, the court will look at what benefits the non-breaching party received and whether it can be adequately compensated. The extent of the breaching party’s performance, the hardship it endured, whether it engaged in negligent or willful behavior, and the likelihood it will perform the remainder of the contract are also considered.

How Do Contract Breaches Affect a Company?

A breach of contract can have financial consequences, such as paying damages to the non-breaching party. Compensatory, punitive, or consequential damages can be in play, as can legal costs. Lost profits can result from lost business opportunities or revenue. Reputation damage, operational disruptions, litigation, regulatory penalties, harm to employee morale, and higher insurance costs are other consequences a breaching party can face.

Contact the Law Offices of Jacob Emrani

A breach of contract can involve a wide range of situations and consequences. If you’ve experienced a personal injury due to another party’s negligence or willful actions, The Law Offices of Jacob Emrani will fight for your rights and work to obtain maximum compensation for your losses. Our team specializes in cases involving transportation accidents, pedestrian accidents, premises liability, medical malpractice, defective products, and workers’ compensation. To schedule your free consultation, call (888) 952-2952 today.