A breach of contract occurs when one or more parties involved in the contract fail to hold their end of the bargain. A breach of contract could be anything from a delayed delivery to refusing to make payments.
While a justice system recognizes a contract only when it’s written and signed by all the parties, a party may also be held accountable for a breach of a verbal contract if the circumstances call for it.
However, not only the parties breaching the contract are sued for their inability to fulfill their criteria. An example may include a tenant failing to pay the rent. Even if the contract states that they need to pay a $20 fine every week, they may sue the landlord for exploitation.
From a corporate sector point of view, employment contracts are developed with great care. As it’s possible for the employee to sue the company for their termination, the contracts recognize the scope of compensation and termination terms in most cases.
A breach of contract is not a matter that calls for the same legal action every time. The type of breach is considered before determining the best course of legal strategy by experienced lawyers.
Types of Breach of Contract
Four types of exclusive breach of contracts are studied and practiced by corporate lawyers. Your lawyer is expected to study your case and come up with the best approach that you can take while taking legal action.
Minor Breach of Contract
A minor breach of contract occurs when the major parts of the contract are still binding but minor part(s) of the contract were breached. This happens all the time in every industry. Especially the corporate sector.
Delay in delivery, missing minor parts like an instruction manual in a product, or incorrect shipments, are considered a minor breach of contract until and unless the breach harms the recipient physically, mentally, or financially.
More often than not, minor breaches of contracts are settled between the parties without involving legal systems. However, if the breach has harmed you and it can be proven, legal actions can be considered.
Material Breach of Contract
If the “material” or the heart of the contract is breached, you can seek legal help for material breach of contract. A material breach of contract is considered the most severe type of breach that leaves the non-breaching party with a dysfunctional contract.
For example, if you were promised a license plate with your anniversary date inscribed, and upon the delivery of the car, the dealer fails to provide you with one.
Even though this is a breach of contract, it might not be considered a material breach as the “heart of the contract”, which is the car, was delivered to you. More severe breaches where the dealer fails to actually provide the exact model of the car may be brought to the court for material breach of contract.
Declaration of material breach often depends on the extent of bad faith the breaching party has displayed. If a breach occurs due to a deliberate refusal to follow the instructions mentioned in the contract, in contrast to negligence or factors beyond control, the chances of winning the lawsuit increase.
Anticipatory Breach of Contract
Anticipatory breach of contract occurs when a party announces their unwillingness to honor the contract or threatens to not fulfill the terms mentioned. The unwillingness may include but is not limited to refusing to pay for a service, refusing to continue providing a service for the agreed amount, delaying a project for other ones, and so forth.
A small firm taking a loan can be considered an example. The borrower, upon anticipating their inability to pay off the debt within the contractual date, communicates with the bank. The lender, if negotiation isn’t reached, can take legal action against the small firm to minimize the damage.
Actual Breach of Contract
Actual breach of contract refers to the events when the non-breacher keeps the end of their promise, but the breaching party completely ignores their duties. It’s the most common occurrence of a breach of contract. A vendor refusing to ship a product despite receiving the payment, a company delivering an unfinished product as a polished one, and other breaches that directly affects a party economically.
Process of Breach of Contract Legal Action
If you are certain that you were a victim of a breach of contract, you are allowed to sue the other party. The process to take legal action against the breaching party includes:
Hiring an Attorney
The first step toward suing the other party for breach of contract is hiring an attorney who specializes in corporate and product laws. Your lawyer is expected to review the case, plan a strategy, and represent you in the court with witnesses and proof.
Even if your lawsuit is solid, don’t try to argue your case without a lawyer. A lawyer should be able to secure the compensations that you deserve and more.
Reading the Contract
After you’ve hired a lawyer, provide him with the contract to study. If you already have a lawyer, review the contract with them to understand when and how the breach occurred.
This is a critical stage as the integrity of the lawsuit depends on the strength of the contract. If the contract is sloppy and leaves a lot to speculation and is filled with loopholes, the defendant might get their way out of it without paying penalties.
Attempting to Remediate
Before taking legal action, consider remediating with the breaching party in presence of your lawyer to see if a mutual ground can be achieved. In most cases, when ample time has passed and both the parties had enough time to sleep on it, negotiations are reached without bringing the matter to the court.
You need to prove that the contract exists. When a contract is signed, both parties are provided with a copy of the same. At the initial stage, your focus should be to provide the court documentation that proves the existence of the contract.
In case of a verbal agreement, to prove the existence of the contract, you might need to present witnesses before the court to verify.
Other documents that you need to prepare include
- Documentation that proves that the other party has failed to honor the contract partially or completely.
- Documentation to prove that you didn’t make it impossible for the project to finish.
- Documentation to prove that you’ve performed your duties mentioned in the contract.
Proving That the Failure Caused You Damaged
You are entitled to receive compensation if you were directly damaged by the breaching party. It’s also your responsibility to prove that damage has occurred and the damage directly correlates with the breach of contract.
A painter employed to paint your house doing a clumsy job is considered a breach of contract as you’ve faced losses in terms of material costs and time. But you, not liking the color may not be the ground for a breach of contract in this case.
The Bottom Line
Taking legal action when contracts are breached is costly and time-consuming. Only seek legal action when a mutual negotiation can’t be reached. To sue someone for a branching contract, consider hiring a lawyer, prepare the documents, and prove your performance. You also need to submit proof of the breacher failing to keep their promise.